Christel Cramer

REALTOR

Guide to Short Sales for Sellers and Buyers

Facing Foreclosure? Consider a Short Sale!

I am Real Estate Short Sale Specialist, meaning I have been trained and certified to handle clients with needs for Short Sales.

If you follow the news, you?ve probably read about ?Short Sales?, but most people don?t know what they are, how they work, or how they can help avoid foreclosure. Sellers don't understand that it may help them avoid serious damage to their credit score, and may allow them to qualify for a new loan much quicker. Buyers hear the term also, but don't realize it might be an excellent opportunity to buy a home, at a genuine bargain, which is in better condition than most foreclosures. Many foreclosures suffer damage or neglect at the hands of an owner being evicted, but it's to the seller's advantage in short sales to keep the property looking good.

Short Sale is the negotiation with a lender to accept less than the outstanding mortgage loan when the homeowner is unable to continue making their payments, and the balance of the loan is more than the market value. It can be caused by job loss or significant loss of income, relocation, an adjustable rate mortgage ?reset? to a higher rate, health issues, divorce, or some other reason that would cause the borrower to be in an ?upside down? position with depleted assets. Lenders will sometimes agree to accept less in order to avoid the expense of foreclosure. Their decision is based totally on the best course of action to limit losses, known as loss mitigation, not the borrower?s welfare. 

So it may be to the lender?s advantage, but what about the borrower? Having a foreclosure on your credit report is topped only by bankruptcy in damaging your score. A short sale will lower your score by 80 to 100 points, and you may qualify for a new mortgage in as little as twelve months. Foreclosure will likely drop it by over 250 points, and could cause you to wait three to five years to qualify for any reasonable mortgage. You will still lose your house, but at least the damage to your credit will be greatly reduced. 

Short sales should never be attempted by the borrower directly. Most real estate agents are not trained in the complexities of short selling, so homeowners should make certain that whomever they choose has adequate training and experience. I have been through the training to handle a short sale, I have actually handled short sales, and prior to entering real estate I worked in commercial lending for most of my career, which helps me communicate with lenders; if your agent can't produce similar qualifications, keep looking. It may also be necessary to engage an attorney or accountant. The process can be as long as six months, and not everyone can qualify. The time to pursue a short sale is during the ?pre-foreclosure? phase, when payments are falling behind or a notice of default has been issued, but the lender has not made the decision to start the foreclosure process, which is too late.

There are five things the homeowner should NEVER DO:

?         Never deed your property to a third party.

?         Do not sell your home at a huge discount without lender approval.

?         Never authorize a buyer to deal directly with your lender.

?         Never pay ?up front? fees to anyone!

?         Do not do nothing, and expect the problem to go away. 

There are specific procedures for seeking approval of a short sale. If you call the lender and ask them if it?s okay to sell your home for less than what you owe, they will say NO. There are literally thousands of people in the current market calling them every day, and they will not use their time to help each one. However, if a trained professional approaches them with the right information package supporting the need to pursue a short sale, and why it would benefit the lender, it will greatly improve the odds for approval on a timely basis. It is important to find the correct person in the lender organization to approach, and to be certain that they agree to the forbearance of payments (usually a payment reduction) during the time the short sale is being worked out. This is a complex issue, so if you have any questions call or email me for more information. I can usually qualify those who might be a short sale candidate in just a few minutes. It is a benefit to the homeowner and the entire community to avoid foreclosures if at all possible. If you are looking for a bargain, call me about my short sale listings.