… And Should You Do One?
If you owe more on your home than it can currently be sold for, you are called “being underwater” in your mortgage. These days, with the home values declining, many people have taken a dive into this murky and unpleasant place.
And the frustrating thing is, they didn’t even do anything to get in this situation. The market just changed. And boy did it change. We are experiencing the biggest financial downturn since the Great Depression. But you already know this.
Most people say the best thing to do in this situation is to wait it out. Eventually home prices will go up. They always do… eventually.
But if you can’t wait, due to a job change or financial hardship, then what should you do? One option would be to consider a short sale.
What’s a short sale?
This is when you sell your house for less than you owe your lender. Simple right? Unfortunately there’s more to it.
Short Sale Advantages
On the surface a short sale may be a good thing for all concerned. It’s often better than a foreclosure for both the borrower and the lender.
The lender’s benefit in a short sale is they should get more than they would get if they foreclosed on the property… but less than what is actually owed. The lender gets most of their money and the borrower gets out of bad situation. There’s fewer costs and depending on the numbers, both could walk away better off. A foreclosure turns the lender into a real estate agent and there’s no telling how much of their money they will get back. There’s more risk to them in a foreclosure. And of course from the homeowner’s point of view, they are losing their home in a foreclosure.
But the lender usually has many stipulations before they will agree to a short sale. They want to keep the upper hand and they often have teams of lawyers and accountants that know how to do just that. That’s why it may be good to have your own attorney to help with a short sale process. In Brown & Associates’s case, we have our own Short Sale Negotiator on staff to monitor and expedite the process. We have closed on short sales in as little as 28 days. We even have a website dedicated to helping people with a short sale.
The Dark Side of a Short Sale
Unfortunately, all is not rosy in a short sale. The lender will usually insist on an appraisal to determine the fair market value of the home. They may ask for a Broker Price Opinion (BPO) or a Broker Opinion of Value (BOV) before they will consider a short sale. These are independent evaluations by certified appraisers which become part of the short sale agreement. Obviously their opinion is an important factor for whether the short sale will go through or not and who may have an advantage in the short sale process.
And a short sale may not be great for a borrower’s credit. Credit reporting agencies keep track of short sales if the lender reports the sale and the borrower may have a hard time getting a new mortgage the next time.
However, a well structured short sale agreement may have less of an impact on your credit score. It’s not uncommon for your credit score to go down 40-75 points after the sale. But if you stay up with your bills that may be reversed in 6-8 months.
And to get a short sale to go through can take time. The bank often is slow to respond and typically it takes 4 to 6 months for a short sale to go through. At Brown & Associates we are experts at expediting short sales. As mentioned above, we have done short sales in as little as 28 days and have a website dedicated to helping you get your short sale to go through.
Some Short Sales Are Easier Than Others
If you’ve been keeping up on your mortgage payments you may be in a much better negotiating situation than if you have fallen behind on your payments. So keeping up with payments and moving quickly if you can’t, is the best thing to do. If the bank begins the foreclosure process then it may be more difficult to arrange a short sale that works for you. The bank will have the upper hand if you’ve missed some payments.
But if you are behind, and even facing foreclosure, there is still a lot that can be done. Some short sale solutions actually require you to be a little behind on payments to qualify for the programs. And of you are experiencing a financial hardship that also may help your chances. Again, it helps to talk to a short sale expert like Brown & Associates to help you know what to do. It can actually save you money in the long run.
At Brown & Associates we understand all aspects of the foreclosure, loan modification, and short sale process. We even have a full-time short sales specialist on staff. Contact us here or give us a call today. If you’d like to contact our short sales specialist directly email her here.