Short Sale Pros & Cons

Short sales can help a homeowner out of a difficult situation, sparing him the stress and embarrassment of a long, drawn-out foreclosure process. However, there are drawbacks to the short sale process. Of course, you will lose your home – but that will still happen when the bank forecloses. You will also walk away without a penny of profit from the sale. And, your credit score will take a hit.

Typically, the perfect situation would be that you mysteriously make up for lost time with your home loan installments and keep your home. In any case, for an increasing number of Americans, that is not a reasonable plausibility, so it truly is to your advantage to play an active role. This is the thing that a short sale is about – confronting the issue, rather than just hiding from your moneylender and hoping the issue will go away or, more terrible, leaving the property.

Why Would a Lender Agree to a Short Sale?

Why might your moneylender let you walk away from the home and overlook the deficit on your credit? To spare time and cash. Foreclosures are costly and tedious for loan specialists. Once the lender understands that foreclosure is inescapable, a short sale might appear like the lesser of two evils. Also, short sales help the moneylender look great on paper – the property was never recorded as a real dispossession, which helps the lender’s numbers.

In a short sale, the lender is already concurring to take a discounted or lower payoff on the loan, should they concur to the short sale. The equity position, that is, the property owner, is in the first loss position (as he would be in the first gain position if the property had appreciated instead of losing value). Because of leverage, customarily the lender in a short sale takes a much more preponderant hit than the owner ever will.

This said, there is great liability for a dealer to attempt to cheat the bank by undercutting a home and taking any returns from the deal. A respectable real estate broker won’t partake in extortion with a customer as it at last is not in the seller’s best advantage.

As of late, many lenders have started collaborating with the Home Affordable Foreclosure Alternatives (HAFA) program. This government sponsored short sale program sets pre-approved short sale prices for any sale of properties and also approves three thousand dollars ($3, 000) in moving costs for the seller. Because this is authorized by the lender, it is permitted in a short sale.

Pros of Doing a Short Sale

  1. Avoid Foreclosure

A short sale allows the homeowner to avoid foreclosure, the legal process employed by lenders to enforce payment of a mortgage debt. The homeowner must move from home before the public foreclosure auction. A short sale allows the owner more time to sell the house and find a new spot to live.

The average legal cost to the homeowner going by way of a foreclosure is around $7, 500, according to the U. S. Congress Joint Economic Committee. Add in any additional costs that can accumulate during the sometimes lengthy foreclosure process, which could be just the tip of a hard financial iceberg. And if the homeowner struggles to afford payments, the foreclosure could eventually lead to a financial predicament where bankruptcy — having its significant credit implications for the borrower and costs with the lenders — may be the only option. Therefore, if a foreclosure is generally avoided, it’s in the best interest of everybody involved.

  1. It Can Safeguard Your Credit

From a lender’s view, it’s better to recuperate a portion of a mortgage loan than to soak up a total loss. Therefore, in lieu of a foreclosure, banks will often acknowledge a short sale. This allows the lender and homeowner to end up in a better position.

One concern for many homeowners, however, is whether the financial institution will sue for a deficiency judgment just after the short sale. In an attempt to recover the difference in the amount that was initially paid and the sum of the loan, the bank can file case against the homeowner. A deficiency judgment will appear on a homeowner’s credit report and have a damaging impact, just as a foreclosure would.

But rather than endure a pricey and time-consuming litigation process, a bank will cut its losses with homeowners who are unable to pay their mortgages as a result of proven hardship, such as the divorce or decrease in income. And the reduced cost owed will ease the burden on the homeowners and not irreparably damage their credit.

  1. It Can Offer the Seller Relief

Real estate sales generate a flutter of activity relating to the buyer and the seller, and they’re often stressful of course. But they don’t compare to the pressure that a homeowner is under a foreclosure. The major credit hit, the drawn-out legalities and the general stigma connected to foreclosure is usually quite unnerving.

Short sales are not exactly risk-free on the subject of the seller’s credit rating, and they will not completely diminish this financial implication when homeowners cannot pay for a house that they purchased. But the sale will open the entryway to solutions for homeowners which may allow them avoid legal action plus the lengthy, laborious foreclosure process.

Cons of Doing a Short Sale

  1. Financial implications

Lenders may consider getting a deficiency after a short sale in some states. The collateral amount sold is determined by the difference between the balance of the mortgage loan and the price of the property. The borrower may be liable for taxes by the IRS, on the amount forgiven by the lender.

  1. Selling Obligations

The homeowner must list the home available and find a buyer to accomplish a short purchase. Some lenders require a real estate agent be used for the sale. The short sale application involves the seller providing the lender with solid proof, such as the borrower’s pay stubs and proof of hardship. A seller who has a high-paying job or assets might have a harder time carrying out a short sale with a lender.

  1. Bank is in the Driver’s Seat

When you offer a house in the standard way, you give orders. You set the listing value, you negotiate offers, you accept or dismiss a deal. In a short sale, you are only one player- – and not an essential one at that. In a short sale, the dealer puts the house available to be purchased and signs the business contract, yet it is truly the moneylender that chooses whether or not a short sale can continue, sets the time span and negotiates the price.

VA, MD & DC Short Sale Advice

Welcome to our Blog!  The mission of this blog is to provide you resources and tools to help you understand all your options.  We are pre-foreclosure experts that provide FREE Advice and consultation regarding your situation. 

What is a Short Sale?

A short sale occurs when the debt on the property is more than the property is worth.  Under the right circumstances banks will allow you to “sell it short” of what is owed but you need to be able to prove that you are experiencing a hardship.

How We Help.

We have a dedicated team of specialized real estate agents and negotiators that know how to navigate all the little details, strategies and complexities of doing a short sale all at no cost to you.  The banks pay all the commission and fee’s which means our interest are aligned and we only get paid by the banks if we successfully negotiate a short sale.

 

 

Foreclosure Process In Virginia

If you have become delinquent with your mortgage payments and have received notice that your property may be foreclosed on, you may be wondering what the foreclosure process in Virginia entails. The process can vary slightly from location to location, so it is important to understand what the process is and what stage in the process you are currently in. By doing so, you may learn more about any options that are currently available to you through this process.

The Power of Sale Clause
Most mortgages are initially signed with a special clause in the wording known as a power of sale clause. This clause has specific notice requirements that must be followed before the foreclosure. For example, the foreclosure sale must be advertised in a specific interval over the course of one to two weeks in a local newspaper. The advertisement must also be served to the property owner 14 days before the sale is to occur. There also rules regarding when the actual sale can occur that property the property owner’s rights. Under the power of sale clause, the property can be auctioned off to the highest bidder. The bidder must make a cash deposit of at least 10 percent of the bid.

A Judicial Process
The power of sale clause option is a non-judicial option, but there is also a judicial option for the foreclosure process in Virginia. With this process, the property will be sold in a publicly noticed sale, and a local sheriff usually facilitates this process. This type of judicial process usually includes a lis pendens being recorded against the property.

The Time Frame
The typical foreclosure process in Virginia takes approximately 60 to 90 days. While some will walk through this process, others may want to avoid foreclosure. A short sale is an alternative to a foreclosure. It essentially means that the owner is selling the property for less than what is owed to the lender. The lender must agree to the short sale beforehand. While a short sale can impact the credit of the property owner and result in a loss for the mortgage holder, it may be a more attractive option than the alternative for both parties.

If you are facing a foreclosure, understanding the foreclosure process in Virginia is important. You may consider working with a real estate agent and an attorney to learn more about how you can avoid foreclosure and minimize the impact to your credit rating.

Can I Short Sale An Investment Property?

Absolutely.

Some people erroneously believe that short sales are only an option for personal primary residences. This is not the case.

You can still do a short sale for investment properties as long as the house is worth less than you owe + closing costs and you have a documented hardship. Hardship for an investment property could be any situation affecting your finances and/or the profitability of your investment property. This could include a significant damage or unexpected expense for the property (such as HVAC, structural, or other replacement necessary), an extended unplanned vacancy, decrease in rents, etc, to the point that you can no longer afford mortgage payments.

Your credit will still be negatively affected, but short sales are an alternative to foreclosure or an opportunity to get out from under a struggling investment property.

To learn more about whether a short sale is right for you, call Rob’s team today at 703-212-3344.

What Does a Short Sale Cost Me?

For homeowners who can no longer keep up with their mortgages, worrying about fees and expenses to do a short sale is the last thing they need. Fortunately, using a short sale expert to help your sale doesn’t have to cost you an arm and a leg.

When you use our team of experienced short sale agents:

You will not have to pay commission on the sale.

You will not have to pay any out of pocket fees.

You will be cleared of deficiency debt.

This is not necessarily the case (especially the deficiency debt erasure) with all short sale real estate agents, so make sure you ask!

There may be some costs along the way that will make the process smoother if you can at all afford to pay them. These include any unpaid Real Estate Taxes, Tax Liens, HOA fees, Condo fees, and any other liens on the property. At the very least, you need to let your negotiators know about any and all of these unpaid costs as soon as possible to coordinate your strategy for negotiation with the bank. Finding out about an HOA lien on the property at the last second can derail an otherwise progressing short sale!

If you think a short sale might be the right option for you, you can give us a call to find out more about how our team can help you get your underwater property sold at 703-212-3344 today.

 

Doing A Short Sale While In Loan Modification

As a homeowner looking in to short selling your home, chances are you have explored several different options for your situation. Many people explore loan modification as an alternative to short sales. The main difference between the two is outlined below:

Short Sale involves SELLING your home. You list it for sale with a Certified Home Rescue Expert© realtor and find a buyer. Then your realtor, with the help of a professional team of attorneys, negotiates with your lender to accept the preferably market value offer and let you walk away owing nothing. It sounds too god to be true, but it works – just ask about my 99% success rate.

Loan Modification involves the homeowner working with their lender to change the terms of their mortgage loan to make it more affordable. Past due amounts and/or the difference in the new lower monthly payments are typically rolled into the loan.

There is a problem, however, if you initiate a loan modification and then decide to do a short sale instead. Many times, the loans get “stuck” in modification, and if the property owners do not disclose to their real estate agents that they have tried to do loan modification, it can tie up the process of doing a short sale, making the process even longer and more complicated.

The best thing to do if you decide to do a short sale after trying to get a loan modification is to follow up by calling your lender, writing a statement declining modification, and getting confirmation that they will end the loan modification.

If you are interested in doing a short sale on your property instead of a loan modification, give Rob and his team of short sale experts a call at 703-212-3344 today!