A short sale is when a bank or banks are willing to settle with a borrower for a payoff on their loan(s) for LESS THAN THE AMOUNT OWED to allow the borrower to sell the property. It is generally the best alternative for a person who is "UPSIDE DOWN", owes more than the market value of the home after sales costs, and has exhausted other alternatives to their financial problems, such as debt consoldition and loan modifacation.

Most lenders will consider this short payoff, depending on the amount of loss, since it allows them to get rid of a NON-PERFORMING ASSET more quickly and usually at less cost than if they foreclose on the property!  In fact, short sales are becoming more successful now, as lenders have started getting their procedures in order to process them more quickly and have realized that on the average they save tens of thousands of dollars over taking the home back in foreclosure and then foreclosing!  The new government HAFA program under the federal government's MAKING HOMES AFFORDABLE program has recently been instituted to streamline the process even more and offer cash incentives to lenders and the home owner (up to $3000 for relocation),  Under these new programs a short sale can be preapproved by the lender(s) before the home is even marketed, making the actual sale process much quicker for buyer and seller--a big improvement over the 6 months or more short sales have been taking under the old systems!

ADVANTAGES OF A SHORT SALE TO THE SELLER

1).  LESS DAMAGE TO OWNER'S CREDIT THAN A FORECLOSURE

A foreclosure stays on your credit report for 7 years and can make it difficult to get a new home loan or other credit for a cosiderable part of that time. Short sales are being accepted more and more by lenders as an understandable situation and that the person tried to "do the right thing" by seeking to get the home sold with the least loss to the lender! 

Depending on the circumstances of the financial distress and the intent of the owners of the home, lenders are changing their guidelines to allow loans to persons with a short sale on their record in as little as two years.  FHA will even consider making a new loan immediately in some cases!

It is critical that the intent is clear to get the home sold when there is no other alternative, and that the homeowner did not "drag his feet" and prolong the deliquency period to get the maximum "free time in the property or move out and rent it prior to the sale. 

What are called "STRATEGIC FORECLOSURES", where the owner has just decided that they will let the home go since they owe too much money on it compared to its value, but have no real financial hardship, are considered harshly by lenders making new home loans, and can often prevent a loan being approved for a much longer time.  Many lenders will not approve a new loan for a person they consider to have done a strategic foreclosure for up to 7 years and FHA recently announced that they can never get a new loan from them!

2). MORE ORDERLY PROCESS WITH SALE TAKING PLACE IN A CONTROLLED MANNER WITH AMPLE TIME TO MOVE AND PERHAPS EVEN CASH TO HELP WITH THE MOVE.

Your realtor handles all the negotiation with the bank(s) and things proceed as with a normal sale.  This causes much less stress with your personal life and that of your family. HAFA offers up to $3000 for relocation to the seller who does a successful short sale under this program.

3). LESS LOSS TO THE LENDER, WHICH CAN POSSIBLY HELP WITH TAX AND DEFICIENCY JUDGEMENTS AGAINST THE SELLER AFTER THE SALE.

Short sales usually result in less loss to the lenders, which in some circumstances can come back to the seller in the form of less taxes owed and less deficiency, should the lender not "forgive" the debt itself, but just let the home sell, retaining the right to collect any deficiency from the owner.

This is a definite matter to be analyzed by legal and tax advisors since it is a very complicated area!

Under the new HAFA program lenders agree to absolve the short sale seller of all continued liability for the deficiency in the payoff of their loan(s)--which is a very big benefit of this new program, if the seller qualifies!

FOR MORE INFORMATION

ON THE SHORT SALE PROCESS,

 WHAT IS REQUIRED AND

IF YOU QUALIFY FOR THE

NEW GOVERNMENT HAFA PROGRAM

CONTACT US ANYTIME

 FOR A FREE, CONFIDENTIAL CONSULTATION.