Real Estate is totally different today than it was just ten years ago, especially because of the “Great Recession”. One thing that has changed is that, more than ever, the term “Short Sale” is now a hot topic that almost anyone paying attention to the news media must have heard. Many sellers who have determined that they can’t sell their home for the amount they owe are now considering doing a short sale instead of allowing the lender to foreclose. But is it always a good thing? How can you tell whether a short sale is right for you? Let’s take a look at some guidelines that will help you decide.

What a Short Sale?

Nowadays, a lender will agree to accept a lesser amount for the sale of a home than the amount which is due. This is considered a short sale. For instance, perhaps the home mortage is $150,000, but the home is worth only $120,000. This means you are $30,000 short. This is not even considering closing costs, recording fees, real estate commissions, or title charges.

Why will a lender approve a short sale?

The lender who agrees to the short sale does so to avoid going through foreclosure and incurring the costs associated with it. When the lender approves a short sale, they are basically allowing the buyer to purchase the home for an amount less than the mortgage balance.

Here is an example of a short sale, in five steps:

• The seller and real estate agent sign a listing agreement; the home is listed for sale on the Multiple Listing Service (MLS) as a short sale pending the approval of a third party (your lender).
• The agent finds a buyer who makes an offer that is less than the mortgage amount (an amount that reflects the current market value).
• The seller accepts the offer.
• The short sale negotiation with the lender starts once the agent submits the short sale packet (the offer contract from the buyer and other required documents from the seller).
• The lender accepts the purchase offer.
• The buyer presents funds, the lien is released, and the seller signs the deed to the buyer at closing.

It’s a great solution, as long as you’re a good candidate for the short sale.

What are the qualifications that indicate that the short sale is right for you?

• Your home’s market value should have dropped. Furthermore, you need to be able to substantiate that the home is now worth less than the balance that is still owed on it.
• The mortgage should be near or in default status. At one time, lenders wouldn’t even consider a short sale when payments were current. That’s changed because lenders are now considering Strategic Short Sales as well. Many lenders now, understanding that other factors might contribute to a possible default, want to head off future problems. Therefore, they are open to consider a short sale.
• The seller should have fallen on hard times. This means that you, the seller, should expect to demonstrate to the lender why you’re not able to keep making payments on your mortgage. As in you need to show the true reason for your financial hardship which should include why you have or will soon stop making monthly payments.

So what constitutes hardship?  Any of the following usually qualify:

• Unemployment
• Death
• Bankruptcy
• Medical Emergency
• Divorce
• Lack of Assets by the Seller

On the other hand, the following usually are not accepted as financial hardships:

• Problems with the Neighbors
• Plans to Buy Another Home
• Bad Spending Decisions
• Pregnancy
• Plans to Move to an Apartment

Keep in mind that usually, the lender will ask for a copy of your tax returns or other financial statement. The lender might not grant the short sale if he discovers that you, as the seller, have significant assets. They’ll feel—probably correctly—that with those assets, you should be able to pay the balance. This doesn’t mean that sellers with assets are never granted a short sale.  But when they are, they are frequently asked to repay part of the short-fall.

In conclusion

Finally, remember that being granted a short sale will depend on if there is a buyer who makes an offer to purchase and the experience of the real estate agent negotiating the short sale.  Without such an offer, you won’t qualify and without a seasoned agent working on your short sale, it will not get approved by your lender. It also will depend on whether or not the lender agrees to accept the buyer’s offer. The short sale will not take place of the lender rejects that offer.

Bottom line: The short sale is not a miracle pill that will solve all problems for the person who is behind on their mortgage payments. However, it can be a life-saver for the person who meets all of the qualifications. If you are a Maryland (MD) homeowner in needs of an agent with proven short sale experience? Check out one of my successful, approved short sales and then feel free to contact me. I will be glad to answer all your questions!

Questions for you

• At what point would you think that a short sale is the only option left for you?
• What would keep you from considering it? Tell me your thoughts.

Visitors who read this post also read:

• A True Foreclosure Story – Note: the tale you are about to read might be yours!
• Maryland short sale approval success story: $91K Forgiven (discounted) by American Home Mortgage Servicing
• Free Short Sale Seminar for Maryland Homeowners on How to Stop Foreclosure by Owen McGab Enaohwo; a Realtor and Certified Short Sale Specialist

Painting the picture – You are a homeowner experiencing a financial hardship, you have lost your job and can’t keep up with your mortgage payments. You desperately need to find a solution to the problem because it’s weighing down heavily on you. You can barely function or think properly because it feels like your whole world is crumbling and you need to get you life back on track.

The credit police – You are tired of creditors, especially your mortgage lender hounding you or worse not even responding to your inquiries for help. You really do not want to sell your home if you can help it but realize that not only has the home lost its value, even if you could get your lender to reduce your monthly mortgage payments, you still will have tons of negative equity and your reduced monthly payment would hardly do anything to reduce the underlying principal balance that you owe. What you really will prefer is for your lender to reduce the principal balance and the monthly payment at the same time so that you can keep the home but heck that isn’t going to happen and you know it. To make matter worse, you just watched a report on the news that stated that most Loan Modifications don’t work and the borrowers eventually end up defaulting again.

A friend indeed – You have started talking to your friend about your situation and as true friends they sympathize with you. The solutions they suggest to you only serve to confuse you; it’s not really their fault because you know that they might have gotten their information from the wrong source. Then you realize that you need to talk to a professional who can give you sound advice on how to avoid foreclosure.

The mailbox overflows – Everyday your mailbox gets a new dose of letters, postcards and all sorts, you are sure now that even the mailman knows your situation and are afraid your nosy neighbors might be in on it too. Not only do you have to put up with constant calls from your creditors and so on, now it seems everyone from your lenders to others offering “scam-like” help in exchange for upfront payments are now waging a war on your mailbox. Something has to be done about this, enough is enough!

Seeking Professional Help – Your online research for a solution to your problem is finally paying off. You have been proactively seeking a way to avoid foreclosure that you now know the term “Short Sale”. At first you thought it meant the property will sell quickly but then you find out that it means that the lender accepts a “short payoff” – a lesser amount at the sale of the property instead of what is actually owed to them since the property has lost its value. You call your mortgage lender demanding a short sale and they tell you that you first need to get a Real Estate Agent to list your property, find a buyer, negotiate the short sale, and get it sold. They also tell you all the list of documents you need to put in place, the estimated length of time the negotiation might take, all the steps involved and so on it begins to seem so mind boggling and you wonder why it’s not called a “Long Sale”. You almost give up but persevere and decide to find a real estate agent who specializes in short sales.

Get the door, help has arrived – You finally found a real estate agent with a proven experience and track record getting short sales approved and sold. The agent even insisted on showing you video testimonials from past and recent clients who vouched for their ability to provide the short sale solution that you desperately need. The agent walked you through the entire process, explained any new laws, guidelines and processes that will affect the outcome of the short sale and answered all your questions; now you feel like you can begin to breathe again. The agent signs the necessary listing paperwork with you and puts the property on the “Multiple Listing Service” (MLS) at the right price to bring in a flood of buyers looking for a great deal. You finally receive an offer and the agent puts together all the necessary contract paperwork from the buyer and collects all the documents that your lender requires from you in order to submit the complete short sale packet.

A favorable ending & new beginnings – After couple of weeks that seemed shorter than you had previously expected, your agent was not only able to get the short sale approved, he was able to work efficiently and effectively with all parties involved in the transaction in order to get to closing the sale. Now today you are at the closing with the buyer. You can’t help but smile because you know that you are about to sign the closing documents which means you are about to take the first step toward a better future; you can now begin to see this entire nightmare from the rearview mirror as you drive away to your bright future!

Your call To action – I have taken the time to go through the pain and suffering that millions of homeowners are currently going through. The sad reality is that most of them are not proactive and do not seek a solution to their problem; many show signs of the “ostrich syndrome” and stick their heads in the sand, do nothing and hope that their problem will disappear by means of a miracle or some magic “Genie”. Many of such people end up in foreclosure which in itself is not something you should have to endure or have on your record especially when it can be avoided altogether. I am happy now because I know that you are not the type of person to do nothing; I know now that you are proactive because you have read this blog post all the way to the end, so congrats! What you need to do now is call up your local Real Estate Agent, interview them and get a sense of their experience negotiating short sales. Once you find the right fit, have them list your property and begin the short sale process. If you just so happen to be a proactive homeowner in Maryland in need of a short sale then allow me to provide you with the solution that you need and the peace of mind you deserve! You can contact me simply by clicking on this above and entering in your details. Note I will treat your information with the utmost care and will respect your privacy. Cheers! Smile because your solution provider awaits you!

Question for you:

• Do you think homeowner’s experiencing financial hardship should sell their properties as a short sale or keep it? Please explain your answer.

Visitors who read this post also read:

• Is a Short Sale Right for You? Read and then Decide!
• Maryland short sale approval success story: $91K Forgiven (discounted) by American Home Mortgage Servicing
• Free Short Sale Seminar for Maryland Homeowners on How to Stop Foreclosure by Owen McGab Enaohwo; a Realtor and Certified Short Sale Specialist

Disclaimer: I am not an attorney, I do not play one on my blog so please do not assume I am practicing law or giving you any legal advice. If you need an attorney, please take the necessary steps to hire one!

On April 4, 2008 a new foreclosure law in Maryland went into effect. All foreclosure proceedings after that date have to follow this law. The law outlines a series of steps that your lender will have to carry out within a specific timeline in order to foreclose. This effectively gives you – the homeowner enough time to find a solution to your problem and avoid a foreclosure as well as the negative consequences it will have on your credit rating. Having a foreclosure filed against you will prevent you from acquiring a loan for a new house within 5 to 7 years after the foreclosure even if your financial situation improves.

Let us go through the timeline and steps lenders have to follow before a foreclosure case can be filed and then eventually execute the sale of your house.

Steps your lender must follow before they file the foreclosure case.

The law requires your lender to first wait 90 days after your loan has been in default before they can begin the initial foreclosure process. In addition, they must send you a “Notice of Intent to Foreclose” 45 days before the actual foreclosure case can be filed at the court house, which makes a total of 135 days; hence you have more than enough time to find a solution(s) to avoid the foreclosure. The notice which the lender files will inform you of their plan to foreclose your house and it also contains the following information:

• why the loan is in default
• The amount needed to bring your loan current
• The date of your last payment
• How to get in touch with your lender, or the office/ person in charge of collecting your loan payments.

This information is meant to give you a clear summary of your financial obligation to the lender.

Steps your lender must follow when they file the foreclosure case.

The law requires your lender to file the case with the county court where your home is located. Your lender has to submit these documents to the court at the time of filing the foreclosure case:

• A copy of the Notice of Intent to Foreclose;
• Certification that you are not enlisted military personnel because enlisted men and women have certain special rights when cases are filed against them.
• The original or certified copy of the assignment of the mortgage if the mortgage was assigned or bought by another lender;
• A detailed estimate of the total sum of money payable to your lender under your mortgage agreement which includes the initial amount owed, interest and monthly charges, late charges, attorneys’ fees and other applicable fees.
• An affidavit of ownership and a copy of the debt instrument;
• Declaration, under oath, indicating the date of default, the type default and the day they sent you information of their intention to foreclose your property;
• Original or certified copy of the deed of trust or mortgage;
• A uniform Notice regarding the filing of the foreclosure action; and
• The mortgage lender and originator’s license number if applicable.

Take note that the case can only be filed 90 days after you are in default of your loan, and 45 days after you have been notified by the lender via a Notice of Intent to Foreclose. The documents the lender is required to submit to the court needs to be properly documented. Any document submitted by the lender containing an error or false information can be used by you to stop the foreclosure proceedings. That is why lenders have to ensure that all information filed with the court is correct and properly documented. You must be given a copy of all of these documents.

Steps your lender must follow after they file the foreclosure case.

• They must personally give you a copy of all the documents that they filed at the court. Your lender has to deliver to you copies of all the documents that were submitted to the court when they filed the foreclosure case against you. If after two attempts on two different days, they are not able to serve you the documents, then the lender must file an affidavit to the court relating the attempts to deliver the documents to you. After that, the lender may deliver the documents to you by using both First Class and Certified Mail as well as post the court papers visibly on the property. In doing this, you will not be able to tell the court that you were not informed by your lender because you never received the documents.

• Your lender must wait an additional 45 days from the time you received the foreclosure documents before they can hold a sale of your property. The lender has to advertise “Notice of Sale” of your house in a newspaper with general circulation in your county for three weeks back-to-back. The first ad has to be published no less than 15 days before the date of the foreclosure sale, and the last publication should not be more than 7 days before the sale. Your lender has to inform you of the time, date and place and the terms of the sale through certified and first class mail. You should receive the information not later than 10 days before the date of the sale. The sale will not stop if you fail to receive the letter informing you of the foreclosure sale.

Note that you can stop the foreclosure one business day before the sale by paying a certain amount as determined by your lender which will include missed payments, late fees and costs. Upon request, your lender will provide you with the exact information on how to cure your loan and provide instructions how to deliver the payment.

In conclusion, the April 2008 law gives Maryland homeowners a lot of time to remedy their situation. The entire process can take more than 6 months; from the time your loan went into default, to the time you end up losing your home to foreclosure. This will only happen if you choose to “dig your head in the sand” and do nothing. That said; I am positive you are the proactive homeowner; otherwise you would not be reading my lengthy blog post. The mere fact that you are here proves to me that you have chosen to “grab the bull by the horns” and find a solution that will help you avoid foreclosure. Congratulations! You are on the right track, now allow me to propose a solution for you – it is call a Short Sale.

The first step you need to take is to find a local Real Estate Agent to help you with a Short Sale

Within the 90 day period that the law prevents your lender from moving forward with the foreclosure proceedings against you, I suggest you find a real estate professional that can help to analyze your situation and find out if the best option for you is to sell your property through a short sale. The reality is that short sales tend to take time and the earlier you get started, the better your chances are of selling the property before the foreclosure. Even though your situation might be difficult and emotionally challenging, be encouraged by the fact that your actions to seek help from an agent at the early phase of the foreclosure will yield a better result and increase your chances of taking back control of your financial situation and getting the peace of mind you deserve.

For more information on the short sale process, read my blog post titled “Take a dose of the Short Sale pill from your local Realtor to relieve your Mortgage payment Headaches”. Also read my blog post on the Home Affordable Foreclosure Alternatives (HAFA) guidelines to determine if you qualify for HAFA and its benefits.

I hope this blog post gave you a clear understanding of the Maryland Foreclosure Law, the timeline and the requirements your lender has to follow before being able to foreclose your property? Please, take time to share your thoughts, questions and ideas with me and other readers to this site by leaving a comment below.

Visitors who read this post also read:

• The HAFA Guidelines for Maryland Homeowners who need a Short Sale in order to Avoid Foreclosure
• Short Sale VS Foreclosure VS Deed-In-Lieu of Foreclosure; which of these represents the best choice for a homeowner in distress
• Documents required by lenders in order to begin the Short Sale process

In a nutshell, the Home Affordable Foreclosure Alternatives (HAFA) Program which kicks off on April 5th, 2010 is for those homeowners who have decided that “enough is enough” and have chosen to take control of their situation by getting their property sold by a Real Estate Agent by means of a Short Sale. Please read my previous blog post titled “Take a dose of the Short Sale pill from your local Realtor to relieve your Mortgage payment Headaches” to get an idea what a “Short Sale” is all about.

In that post, I stated that the “short” in a short sale transaction means that the property in question ends up selling for less than what the borrower actually owed their lender. Up till now, it did not mean that the transaction will be a quick or fast sale. In fact, the short sale process usually takes a lot of time to negotiate successfully and – can become frustrating to many homeowners as well as their Real Estate Agents.

The good news is that the HAFA guidelines are meant to make short sales alot faster, and more transparent to all those involved but I know what you are thinking, you are saying to yourself – “What will HAFA do for me and my situation?” Allow me to walk you through the guidelines and it’s proposed benefits.

What is HAFA and how is it of benefit to me?

This program is a subset of the Home Affordable Modification Program (HAMP) program and is for homeowners who are unable to retain ownership of their homes due to their current financial distress.  HAFA provides incentives to qualified home owners.  One major incentive is that borrowers are to be completely released from any amount owed on the mortgage balance as a result of a successful short sale. This applies to both the first mortgage lender as well as the second. Hence, the lenders are not allowed to request for any cash contribution, have the borrower sign a separate promissory note or go after the borrower for the balance by means of a deficiency judgment. Also homeowners are given $3,000 to cover their moving expenses (note this was previously $1,500 and it was recently increased. Either way, I think this is a much needed answer to many homeowners prayers).

How do I qualify for this program?

To qualify for this program you must beyond a doubt be able to say YES to all of these questions:

1. Is the home you are staying in now, your principal residence?
2. Was the the first mortgage on your property issued before 2009?
3. Are you in financial distress? Are you behind on your mortgage payments or do your foresee a predictable default?
4. Is the unpaid principal balance of your mortgage less than $729,750?
5. Is your monthly mortgage payment greater than 31% of your gross income?

If your answer is yes to all the question above then you qualify.

So how does HAFA streamline the Short Sale process?

• Notification

Your loan servicer is directed by the HAFA guidelines to consider you for the HAFA program within a month after one of these things happen to you:

• • You fail to qualify for a HAMP trial period plan.
  • You do not successfully complete a HAMP trial period plan
  • You missed at least two consecutive payments on your HAMP modification
  • You requested for a short sale

Your loan servicer is tasked to communicate to you that you are qualified for a short sale, and you are given 14 days to respond to their notice. If you will not respond within this time frame, you will lose your qualification.

• Short Sale Agreement

You are given 14 calendar days to sign and return a Short Sale Agreement (SSA) to your loan servicer from the date the document is sent to you. Once signed and returned, your lender then allows you to sell your house within a 120 days by means of a Real Estate Agent (Hopefully you choose me).

• Purchase Offer

Within three business days after a purchase offer is received, you or your agent is to submit a completed Request for Approval of Short Sale (RASS) to your loan servicer. Upon receiving the RASS with the complete set of attached documents, your servicer is given 10 business days to advise you whether your request has been approved or denied.

• Closing the Short Sale

Your loan servicer may request the sale close within a reasonable timeframe but is not allowed to demand a closing less than 45 days from the date of the contract for sale without your consent. This is mandated so as to give you enough time to move out of the property. Within 10 business days after receiving the short sale proceeds your lender has to fully release their mortgage lien and the investor has to waive the right to seek deficiency judgments and may not require a promissory note for any deficiency.

Conclusion

HAFA is a fast track approach to implementing a Short Sale. Most home owners facing financial distress in Maryland can make use of this program as from April 5th, 2010. That said, you need to proactive and quickly make the decision to free yourself from the headaches and worries of foreclosure.

By writing this blog post I have taken the liberty to simplify the 45 page document that serves as the new guidelines for the implementation of HAFA. So please feel free to download the entire PDF document and read it yourself because now is the time to grab the proverbial “bull by the horn”, remove your head from the sand (also known as the Ostrich Symdrome) and go get a local Maryland Real Estate Agent who understands the HAFA guidelines in it’s entirety to list your property and negotiate a short sale with your lender on your behalf.

If you have questions about this blog post, or an idea to share, please feel free to leave a comment.

OR

If based on what I have discussed so far you feel I am the right agent to help negotiate your short sale then I will be glad to assist you as well. Click this link and I will get back to you immediately

Visitors who read this post also read:

• Short Sale VS Foreclosure VS Deed-In-Lieu of Foreclosure; which of these represents the best choice for a homeowner in distress
• Documents required by lenders in order to begin the Short Sale process
• What is a Short Sale and why you should have one done for you by a Licensed Real Estate Agent

You have been hit so badly by the economic downturn. Your finances are not in a good shape. You’re having a hard time paying the mortgage on the house, and you are sure that in time the lender will start foreclosure proceedings against you. You want avoid that, but don’t know how. A short sale can help you avoid foreclosure. Do you have an idea what a short sale is? Do you know of any one who went through the short sale process?

I will define the term short sale, so you can make an informed decision on whether to go through with a short sale or not, but before that, let me take a step back and discuss your current situation. This is the common process everyone else went through before they decided that a short sale was in their best interest.

How you got to where you are now

You had to take a loan from a lending institution and your house was used to secure the loan. The loan is most likely for the house you are living in right now; or maybe for something else. You are going through financial hardships, and you have been unable to pay the monthly payment for the loan. You are also more than 60 days behind in payments. You are aware that the value of your property is less than the amount you owe the lender. The lender has been sending collection notices and could initiate foreclosure proceedings against you. You want to avoid a foreclosure. And honestly, your lender wants to avoid foreclosure too. But if they allow time to pass, your loan interest and penalties will increase, and the lenders loss due to your non-payment will also increase. You and the lender are in situation where both of you are losing.

A short sale benefits you and the lender

A short sale allows you and the lender to lessen your losses, keep this in mind because it is the most important reason for deciding to move forward with a short sale. Plus, you are the one who initiates the process to begin with. In a foreclosure, it is the lender who takes action. In most cases, the lender will find ways to avoid initiating a foreclosure. Why? Because a foreclosure process is lengthy and costly for the lender, and the lender does not receive any payments from you, only the deed to your house. One important detail you should be aware of is this -in a foreclosure, you will not be able to get a loan to buy a new home within 5 years, even if your financial situation has improved. In a short sale, you can buy a new house 2 years after. The cost to the lender is lesser, plus, you are able to pay part of the loan amount that you borrowed from the lender. You can negotiate the remaining balance of the loan with the lender. You are also able to avoid foreclosure, a word many financially challenged homeowners were not able to avoid.

How to start the short sale process

This course of action begins when you, the borrower decides that a short sale is the best option. You start the process by contacting a local Real Estate Agent to assist you by listing the property for sale on the Multiple Listing Service (MLS). Immediately the agent will contact your lender on your behalf to make them aware of your situation and the need for a short sale. This is done so that the agent can get the list of all the necessary documents your lender will require and also to find out what steps that your lender requires you follow in order to begin the short sale process. Having a professional real estate agent assisting you with this process will allow you to maximize your time with other pressing concerns. The real estate agent will represent you in negotiating the short sale with the lender and getting it approved; from listing the property and up to the point where your house is sold.

Now, please bear in mind that in a short sale, you will not receive any payment from the buyer of your house because all of the proceeds will be paid to the bank to pay for your loan. And that amount is usually less – or short of – the total amount you owe the lender. The short sale process is initiated to lessen everyone’s – you and the lenders’ – loss.

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Do you know a homeowner in financial distress? Do you think a short sale will be right for them?

Give this much thought. If you have questions, feel free to ask me and don’t forget to leave your comments and suggestions on my blog.

Visitors who read this post also read:

• Is a Short Sale Right for You? Read and then Decide!
• A True Foreclosure Story – Note: the tale you are about to read might be yours!
• Short Sale VS Foreclosure VS Deed-In-Lieu of Foreclosure; which of these represents the best choice for a homeowner in distress

The entire foreclosure process can be very stressful for homeowners; some get so depressed, that they do nothing about it. While others who are proactive sometimes end up being given the wrong advice or make decisions that are not well informed. If you are a homeowner dealing with this situation, you will have to make a decision on whether to get your property sold as a Short Sale usually at the discount approved by your lender, or give the property back to them as a Deed-In-Lieu of Foreclosure or just let them complete the Foreclosure. You need to decide which of these three options is the best for you both in the short and long term? Deciding which option to take might be tough especially if you do not know how each will affect your credit and ability to buy a home in the future.

Short Sale VS Foreclosure VS Deed-In-Lieu of Foreclosure

A short sale transaction occurs when a lender agrees to a discounted payoff on the loan balance, due to the financial hardship experienced by the homeowner and/or a decrease in the resale value of the property. A short sale is the best option if you are facing foreclosure because it is a lesser financial loss. You get to avoid foreclosure, reduce the adverse effects on your credit and increase your chances of getting a loan to buy a home within a shorter period of time.

Foreclosure occurs when a lender sells or gets back a parcel of real property, after the owner failed to conform to their mortgage or deed of trust agreements. The estate becomes the absolute property of the lender. The foreclosure process generally starts with a formal demand for payment in the form of a letter called Notice of Default (NOD) issued from the lender. It varies from state to state but in most cases the lender usually issues this notice when the homeowner has been 3 months irregular on their mortgage payments. The notice is typically a warning that they will sell your property if you do not make your payments current.

Deed in Lieu of Foreclosure is the alternative to a foreclosure. This is a settlement, which is voluntarily made, and in good faith in which the borrower surrenders their house to the lender and moves on with nothing owed. The main advantage for the borrower is that it immediately releases them from the debt associated with the defaulted loan. The borrower also avoids a painful and time consuming foreclosure. The main advantage for the lender is a reduction in the time and cost of repossessing the property. In most cases a lender will only accept a deed in lieu if there are no other liens attached to the property or these liens can be significantly reduced. The reason is because they do not want to be responsible for the other liens that are attached to the property; this is why most lenders will push for a foreclosure instead because it removes all junior liens.

How does each of the three options affect your credit and the length of time it will take to buy another home?

Short Sale:

This the best option for a homeowner facing foreclosure due to its reduced adverse effects on their credit and their ability to get a loan to buy another home in a shorter period of time.

Short sale credit reporting options are:

• Paid Settlement – In which, credit score will drop 50-150 points.

• Paid, As Agreed – in which, won’t hurt the score at all as long as the borrower is paying regularly.

• Unrated – In which, may drop a few points.

Fannie Mae & Freddie Mac guidelines states that the waiting period before you can buy a new home is 2 years from the date the proceeding is completed. And there is no exception for extenuating circumstances.

Foreclosure:

This is the least advantageous of all of the three options; it will remain in the credit report for 7 years from completion date and the credit score will drop from 50-250 points. Another disadvantage is that when Deficiency Judgment or Tax Lien is filed the credit score may drop an additional 100 points.

Fannie Mae & Freddie Mac guidelines state that the waiting period is 5 years from the date of foreclosure completion proceedings.

Below are requirements in addition to the 5 years up to 7 years after completion date:

• Purchase of a primary or principal residence is permitted, 10% minimum down payment and the minimum credit score is 680.

• Purchase of a second home or property investment is not permitted.

• No cash-out refinance is permitted.

Extenuating circumstances are acceptable such as loss of employment and severe medical crisis and if approved the waiting period is 3 years from the date of foreclosure completion proceeding. The same additional requirements are applied as above except the minimum credit score of 680 is not required.

FHA Guidelines state that the waiting period for a foreclosure is 3 years from the foreclosure completion proceedings. However if foreclosure is a result of extenuating circumstances such as serious illness or death the lender may grant an exception.

Deed in Lieu of Foreclosure:

Credit scores will carry the same serious effects as Foreclosure because most lenders report a deed in lieu of foreclosure as foreclosure. However the reality is that what is reported can actually be negotiate with the lender. It will remain on the credit report for 7 years from settlement completion.

Deed in Lieu credit reporting options:

• Paid Settlement – In which credit scores can drop up to 150 points

• Paid as Agreed- Credit scores show a dropped over 100 points due to default in payment but with this option borrower could purchase a home in a short period of time.

Fannie Mae & Freddie Mac guideline state that the waiting period for a Deed in Lieu of Foreclosure is 4 years from the date of completion proceedings.

Additional requirements after 4 years up to 7 years from completion date:

• Greater than 10% minimum down payment required for the transaction or purchase of investment property, principal residence or a second home by a borrower.

• There is a limited-cash-out and cash-out refinance are permitted if eligible and meet the requirements.

• Extenuating circumstances, physical condition such as medical crisis or other factors such as loss of employment that caused a borrower to choose the option Deed In Lieu of Foreclosure, the waiting period is 2 years from the completion proceedings.

In summary, the guidelines stated above clearly show the advantages for you to choose to short sale your property compared to allowing it to go into foreclosure or deed in lieu because the adverse effects to your credit is reduced and also, you will just have to wait 2 years to get a loan to buy another home instead of 4 years with the deed in lieu option or 5 years with the foreclosure.

Visitors who read this post also read:

• Documents required by lenders in order to begin the Short Sale process
• What is a Short Sale and why you should have one done for you by a Licensed Real Estate Agent
• Townhouse For Sale Bowie Maryland Short Sale 11201 Westport Dr Home

A Short Sale is a type of real estate transaction wherein a homeowner sells their property for less than what they owe the lender. For most lenders to consider a short sale, the homeowner must be experiencing a financial hardship and is unable to make their mortgage payments. Also, the mortgage itself has to be upside down; meaning that the value of the property has dropped and hence there is no equity. The lender takes a loss, and any unsettled balance is usually forgiven. In order to begin the process of negotiating and then approving the short sale, you will need to submit a set of documents required by most lenders. The primary documents are:

• Authorization to Release information. This authorization is an important document because it instructs the lender to discuss your loan with a third party, which in this case is your real estate agent who is helping you navigate the short sale process. The authorization should contain the following data.

a. Name of all the borrowers

b. Social security number of all the borrowers

c. Address of Property

d. Names of lenders/creditors

e. Loan number

f. Signatures of all the borrowers

g. Date

h. Name and contact information of your real estate agent (or whomever you want the lender to release your loan information to)

• Borrowers Financial Statement. This document highlights in detail your assets and liabilities. It is a worksheet that accounts for all your income and expenses. It also should include your co-borrower’s financial information.

• Listing Contract. This is the contract between you and the listing agent. It is needed so the lender can see that your agent has made the effort to expose the property to as many potential buyers as possible in order to received offers by placing it on the Multiple Listing Service (MLS). It also highlights the commission charged by the real estate agent. Agents are often needed in order to speed up the process.

• Purchase and Sale Agreement. This is an agreement that contains the accepted buyer offer. The contract should be legitimate and must be signed by all the owners of the property. A short sale package is considered incomplete without this document. Only packages with a contract that has been signed by both the buyer and the seller should be submitted to lender.

• Borrowers last two pay stubs. You need to include your two most recent pay stubs in the short sale package. This allows the lender to easily determine how much you make and verify your financial hardship. If you are self-employed you can provide a loss and profit report. For unemployed borrower you must present the latest pay stub available.

• Two months of Bank statements. You need to provide your two most recent bank statements. If you have more than one account, all the statements must be made available for the lender to review.

• Last two Tax returns. You need to provide your two most recent yearly tax returns. If you have missed filing your taxes then present the latest available and create a personal note to the lender stating the reasons why.

• Personal hardship letter. This letter must contain your true financial situation and the reasons why you need a short sale. It’s always better to mention in this letter all the steps you had taken previously to avoid having to sell the house, how getting a short sale approved is much better for you than a foreclosure and that you understand that you will not be getting any proceeds from the discounted sale of the property.

• Comparable Market Analysis of value (CMA). This is based on the characteristics of the property being considered, the number of similar properties for sale and so on; it is the estimated current value of the property. Your real estate agent should prepare the CMA and submit it with short sale packet because it helps to give the lender a clear sense of how property values have dropped in your area, hence the need for the short sale. Once the negotiation has begun, the lender will usually order a more detailed CMA a Broker Priced Opinion of value (BPO) from a third party company in order to determine the current value of the property.

The documents listed above are the vital documents needed by most lenders to begin the scalled hort sale process. However each lender might demand additional documents, hence your agent should contact the lender ahead of time and get their list of required short sale documents before submitting the complete short sale package.

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What is a Short Sale?

A Short Sale is a real estate transaction in which the revenues from the sale fall short of the balance owed on a loan secured by the property sold. Short sales have become the order of the day due to the financial hardships experienced by homeowners whose mortgages are upside down and can no longer make their mortgage payment for one reason or the other. Instead of letting the bank foreclose and ruin their credit, homeowners are now opting to do a short sale.

Who Benefits from a Short Sale?

After a short sale, the home is sold to the buyer and the seller walks away without any cash from the sale; all proceeds go to the lenders and other creditors on title. The main advantage of a short sale to the seller is that he/she can avoid owing the balance of the loan and also get to avoid the long term negative consequences of a foreclosure on their credit.

The buyer’s advantage is clearly the prospects of getting their new home at a significant discount compared to what they might have paid for it a few years back. Buyers should be aware that the short sale process often takes time and are required in most cases to purchase the property as is. In the end, the reward for being patient is a new home at reasonable price.

Mortgage lenders benefit as well, they avoid the cost of a lengthy foreclosure process. Most lenders will agree to a short sale if the seller can prove that they are financially insolvent and also if the lender is made to see that it’s in their best interest to take the discount now instead of taking the property back after a foreclosure and then trying to sell it for less than what they can net right at the moment if they approved the short sale.

The Short Sale Process

The paperwork required can be quite daunting and laborious to put together but if done properly by an expert, the short sale will get approved by the lender in a shorter period of time and surely benefit all parties involved. The short sale process will differ for each lender but in summary it will usually work as follows:

1) Lender is contacted to discuss the possibility of a short sale.

2) The seller gathers all the paperwork that the bank requires and shows proof of financial hardship.

3) Lender reviews the completed package sent in by the seller and then starts the process to verify if it’s in their best interest to accept the short sale offer from the buyer.

4) Then the last phase is the follow up and negotiation phase until the lender approves or denies the short sale.

Hiring a Licensed Real Estate Agent

It is very important to hire an agent to get the short sale approved and find buyers for the house, a real estate professional who can answer your questions and help you steer through the process from the beginning to the end. A Licensed Real Estate Agent also performs their duties with the best interests of the seller in mind because they are bound by certain fiduciary responsibilities and their activities are regulated by the state’s real estate commission.

The foreclosure process can be long, stressful and embarrassing for the borrower. Getting a Short sale approved is the answer and all parties involved end up in a better position at the end of the process than if a foreclosure is completed .The lender automatically gets their money when the sale closes and the homeowner can walk away from the property he/she can’t afford. The buyer ends up buying a good property at a discounted price. Getting a short sale approved can be very difficult and time consuming for someone who is not an expert, if you are considering a short sale, make sure that you hire a Real Estate Agent that is an expert at getting short sales approved by the lender.

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Visitors who read this post also read:

• Documents required by lenders in order to begin the Short Sale process
• Short Sale VS Foreclosure VS Deed-In-Lieu of Foreclosure; which of these represents the best choice for a homeowner in distress
• Townhouse For Sale Bowie Maryland Short Sale 11201 Westport Dr Home