What is a Short Sale?
Living in Arizona the term short sale comes up a lot. It seems that there is one for sale on every corner. A short sale is when you owe more on your property then what you could sell it for in todays market. Negotiations are entered into with your bank for the investor to take less then the amount owed. This can be a very lengthy process and takes patience on both the buyer and the seller. Your typical short sale will last 3-6 months or longer.
Will A Short Sale Cost Me Money?
Most of the costs of a short sale will be paid by the bank. Including real estate commisions and closing costs. It is best that you keep your home in showing condition with the utilities on and yard maintained. This will help us get the highest offer possible to submit to the bank. I do reccomend that you continue to make your Home Owner Association payments. If you are already behind on your HOA dues we can negotiate with the bank to pay for your dues. However, depending on the bank it is possible that they will not pay for them.
Most banks will not consider a short sale unless you are delinquent on your payments. There are few cases where homeowners were able to contiue to pay their mortgage and get qualified but this is not the policy of most lenders. We recommend that the borrower contact their lender first to discuss their options.
Who Qualifies For A Short Sale?
There are three main factors the bank looks at to determine if you qualify for a short sale:
-Your lender will determine if you have a financial hardship. Some examples of hardship are loss of job, loss of spouse, unexpected medical expenses and significant change in your monthly payment due to an adjustable rate loan.
-They will want to determine if you truly cannot afford your mortgage payment. They will review your finances to see if you have any money left over after paying for all of your monthly expenses. They will verify this by reviewing your bank statements and the financial worksheet that you will fill out that list everything you pay for on a monthly basis
-They will order an appraisal or “BPO” which is a Brokers professional opinion to determine what your current home value
If the borrower has the ability to pay their mortgage but is forced to move because of a job transfer or relocation then the bank may still allow a short sale.
Investors can get qualified for a short sale as long as they can prove they
can't afford the property. Even if you think that you may not be able to
qualify for a short sale. Give me a call and let me go over your personal
What Will a Short Sale Do To My Credit?
A short sale will impact your credit. It's a major deragatory item when the lender reports your short sale as a "settled account". While negotiating your short sale I will work with the lender to negotiate what the lender will report to the three credit bureaus. If the lender reports "settled" or "settled for less then full loan amount" then this will not be a major derogatory impact and will not have negative impact. However you will still have the negative impact of the late payments. It is impossible to perdict how much your credit score will be impacted by a short sale. If you are interested in a credit consultation please give me a call and I will refer you to a credit consultant that can help you understand how your credit will be affected.
Does the Mortgage Forgiveness Debt Relief Act of 2007 protect me from owing taxes?
The Robinson Real Estate Group, is not professional attorneys. We recommend that you speak with an attorney and a tax professional before considering a short sale.