Steps to Freedom: Real Estate Short Sales - Answers to the Top 10 Most Frequently Asked Short Sale Questions

With the national real estate market in turmoil we are seeing homeowners turn to short sales as a solution to avoid foreclosure. In this article we will answer the top 10 most frequently asked short sale questions that we receive from clients. We highly encourage you to explore all of your options to avoid foreclosure and become as informed as you can about each option and speak to qualified individuals who can help you decide what is best for you and your family.

Now, let's answer some questions!

1. What is a Short Sale?

A short sale is when a homeowner owes more to the bank than the value of the home and the bank agrees to sell the property for less than is owed. For example, if your outstanding mortgage balance is $500,000 but your home is only worth $300,000 then you are upside-down and may be able to do a short sale to get you out of the property.

2. Why would a lender accept less?

A lender or bank takes a discount or agrees to take less because it saves them money in the long run. It gets bad debt off their books so they can reinvest that money by giving out another loan to a customer. In many cases a short sale is necessary in order to get you out from under your mortgage debt. By doing a short sale, you will be able to take a large bite out of the money you owe to your mortgage company so that you are no longer liable for the entire amount.

3. What is required?

First you need a qualified, professional short sale agent who knows how to handle this special type of transaction. Your agent will know how to properly prepare the financial package for the bank.

Every lender or bank has its own set of required information and some may even have a set of paperwork specific to them. In general, most banks require at least the following:

Hardship Letter

Financial Statements

2 Years Tax Returns

2 Months Bank Statements

2 Months Paystubs

Profit & Loss Statement (If Self-Employed)

Throughout the process additional paperwork may be requested so be sure to keep everything handy.

4. How long does a typical deal take?

Depending on what state you are from, this answer will vary and thl timeline is subject to your lender or bank. Many banks are overwhelmed right now with short sale requests however most do have an understandable review process. Unnecessary delays can be avoided by not sending incomplete short sale packages. Incomplete offers are often passed over or rejected. Your file is then closed and you would have to start over from the beginning. It is very important to be sure you provide everything required by your lender and requested by the person helping you negotiate. On average we are seeing most of these deals being closed in less than 90 days.

5. How much does it cost?

Unlike a traditional real estate listing where you pay an agent a commission to sell your property, in a short sale transaction the lender pays for the commissions so there is no out-of-pocket cost to you.

6. How long until I can buy another house?

There are new loan programs designed to help people who have recently had to short sell their home. You can apply for a home loan in as little as two years provided you have maintained your credit with good payment history, kept your debt-to-income ratios within lending guidelines, and have verifiable income.

7. What qualifies as a hardship?

There are many types of hardships that can be considered valid. Here are a few:

Mortgage rate adjustment

Increase in monthly expenses

Need to move

Reduced Income

Unemployment

Health issues

Separation or Divorce

Medical Bills

Business Failure

Business cutbacks or downsizing

Death of a Spouse

A valid reason you are unable to make your mortgage payment

8. Can I short sell an investment property or 2nd home?

Absolutely. It is a common misconception that people think they can only short sell their primary residence but this is not true! You can do a short sale on your primary home, all of your investment properties, and even on your second home.

9. What about my credit score?

There is a lot of misinformation floating out there about credit scoring. You will definitely want to seek a credit expert for more information about your situation. In speaking with credit experts ourselves, most have agreed that although a short sale will probably affect your credit in some way it will not be as badly affected as a foreclosure would. A good credit repair company may be able to negotiate any damaging remarks on your credit report. By doing a short sale you can avoid having a foreclosure haunt your credit for years to come.

10. Who can do a short sale for me?

You will need a well-qualified real estate agent to help prepare all your paperwork, list your property, and navigate through the negotiations for you. We also highly recommend that you consult with a qualified tax attorney, CPA, and real estate attorney regarding any future ramifications.

You can find more information about short sales and foreclosure avoidance options at http://www.AzHomeHelp.com

Sean Bonini is a Real Estate Agent/Broker in Scottsdale Arizona specializing in short sales. He serves as the Managing Director of AzHomeHelp.com which is a company that helps homeowners avoid foreclosure.

Sean's up-to-date blog at http://www.PhoenixRealEstate247.com also covers local and national news regarding the real estate & mortgage industries with a focus on helping homeowners in distressed mortgage situations.

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Steps to Freedom

Friday, August 14, 2009

Real Estate Short Sales - Answers to the Top 10 Most Frequently Asked Short Sale Questions