Short Sale

Short Sales in today's market

"Short Sale" is the new buzz word being used by savvy real estate buyers, investors and real estate agents. Did you know that 1 of 886 households in the United State are at some stage of foreclosure and the inventory of lender Real Estate Owned properties are bursting at the seams? Florida’s current foreclosure rate is still at an all-time high, and there has never been a better time for buyers, real estate agents and investors to acquire properties at a discount. Lenders who are overwhelmed with foreclosures, are more accepting of short sale offers than ever from owners facing foreclosure.

Beginning in 2007, it was expected that most adjustable rate mortgages were set to adjust to a higher rate, and lenders were expected to agree to even more short sale offers. This has proven to be true, and this is one of the most constructive ways for banks to limit the number of foreclosures in Florida and recover some of the mortgage money owed to them. Not only are banks saving the time and money associated with completing a foreclosure proceeding but they are also saving the expenses associated with holding these properties on their books, (i.e. insurance, taxes, maintenance, etc.).

What Is A Short Sale?

A short sale is a property sale in which a buyer or a third party offers to pay the lender the amount of the current property valuation which is less than the amount of the mortgage debt to stop the lender from completing a foreclosure proceeding. A foreclosure proceeding could last from 3 – 12 months, depending on many factors, and the costs and expenses can be quite high. Due to this fact, many lenders are seeing the cost-effectiveness of accepting a short sale. The bottom line is what matters to everyone.

Things You Need To Know

Always Communicate With Your Mortgage Company

When you start to realize that you will have difficulty in paying your mortgage, you should contact your mortgage company. Unfortunately, many decide to ignore the phone calls and actually make the situation worse. Many mortgage companies can make arrangements before matters become escalated to the point that nothing else can be done but foreclose. Our best advice is to always contact your mortgage company the moment you realize that you cannot meet your financial obligations.

Seller’s Credit Rating
When a property is sold by short sale, the loan appears as a “paid” item on the seller's credit report. While the credit reporting agencies will put notes in the credit report reflecting that the mortgage company settled for less than the amount owed, this will have less of a negative effect on the seller's credit score than an actual foreclosure.

Differences:
A short sale may result in a loss of 80 to 100 points on a FICO credit score.
A foreclosure on a credit report may result in a loss of 250 to 280 points on a FICO credit score.

After a short sale, a seller wanting to purchase another home, may have to wait approximately 18 months. After a foreclosure, a seller wanting to purchase another home, may have to wait approximately 36 months.

Bankruptcy and Short Sales
Most lenders will not consider a short sale if the owner is currently in bankruptcy, because bankruptcy laws prohibit any collection activities unless such activities go through and are approved by the Trustee.

Timing in the Short Sale Process
Once in pre-foreclosure (default/late on loan payments), try to allow at least 60 days to negotiate a short sale.

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