A “Short Sale” is a sale of real property in which the outstanding loan balances are greater than the amount that the property can be sold for. A short sale is typically done during the foreclosure process, after a Notice of Default” has been filed. A short sale will stop the Trustee Sale which terminates the foreclosure process. The short sale process occurs when our company negotiates with your current mortgage company to accept a discount on the amount that is currently owed on a property. Banks are in the business of lending money and not owning real estate. This is what makes a short sale such a viable option for lenders and homeowners. However, many homeowners are unaware that there is a resource out there for them that will put them in a better situation when all is said and done. The Short Sale is a much more dignified solution then a Foreclosure. The Short Sale is also better for the homeowner for financial reasons and credit worthiness. Their credit is still going to take a hit by doing the short sale, but the recovery period is much shorter.
Typically once a notice of default is assigned, the mortgage company will run different scenarios on your property to determine what they can get for a return on their investment. Your mortgage company takes the following 5 factors into consideration among many others:
1. The foreclosure process costs extra money.
2. They may have to make repairs on the property (especially in foreclosure situations)
3. They may have to pay realtors commissions up to 6% of the selling price of the house. Typically the homeowner would pay these fees but there is no equity left in the house or the homeowner does not have the funds.
4. There are holding costs associated with foreclosure.
5. They will have to carry property insurance on your property and all properties in their Real Estate Owned division.
These reasons will allow the bank to consider taking less that what is currently owed on a property. The lender will typically want their money now as opposed to getting the same amount of money six months from now.
• You can minimize the damage to your credit: Foreclosures can remain on your credit for up to seven years. On the other hand, a short sale will usually report as a “settled debt.” This results in significantly less damage to your credit rating. A short sale will preserve your credit more than a foreclosure and your FICO score will not be as negatively impacted. This will allow you will be able to get into a new home much sooner.
• You can minimize your financial liability: In a foreclosure situation, the lender will sell the property at a significant discount once they regain control and possession of the property. The homeowner can then be financially accountable to the lender. In a short sale situation, the same financial accountability may still stand. However, in a short sale, the homeowner is still involved in the negotiation process. This involvement and contribution of input can allow the homeowner to have more control over the sale price of the property. This can reduce the potential associated liabilities.
You should begin the short sale process as soon as you possibly can. Foreclosure proceedings tend to be extremely time sensitive and the quicker we can open negotiations with the lender, the greater our chances are of negotiating a successful short sale. If you are currently behind on payments and have not received a Notice of Default, please contact us immediately for a free consultation. This will allow us to get a head start on the negotiations. Remember, time is of the essence!
If you currently are not being represented by a Realtor, we can assign a professional to you who are extremely knowledgeable in the details of evaluating, listing, and marketing short sale properties. As soon as we begin working together, your assigned Realtor will assist you in quickly obtaining offers on your property. With these offers, we are able to smoothly negotiate the short sale with your lender. We definitely recommend that you work with a Realtor that is knowledgeable in the distressed property segment of the real estate market. We are able to partner with your current Realtor or if you have a preferred realtor that you would like to use.
Why should I, the homeowner, allow you to represent me?
The foreclosure process is very fast and extremely time sensitive. It is important that the homeowner be made aware of this fact. Our company specializes in foreclosures, and we are professionals. We know the foreclosure process because it is our business. Obtaining a short sale from the mortgage company is a very time consuming and complicated process. We are completely aware that there are other investors that work with foreclosures. The important thing is for the homeowner to feel comfortable with the investor they choose to sell their home to. However, if the homeowner speaks with other investors it is important that they realize that the clock is ticking, and that the sale date is approaching fast.
Yes. However, the process can be complicated, even if you know the right questions to ask. Obtaining a short sale approval is only part of the process. Finding someone to fund out, or purchase the house at a discounted price within the allotted time span is typically the most complicated part. Prestige Real Estate Services works as a third-party loss mitigator. We maintain a neutral standpoint that homeowners and lenders can count on us to be an impartial third party as part of the short sale negotiation process. We stand apart from other companies because we will always strive serve all parties equally in the transaction. This creates a win-win outcome for everybody.
1. Reinstatement: When you are behind in your mortgage and the payments are brought current including any legal costs and penalties. You are then permitted to make regular payments and your mortgage has been reinstated.
2. Forebearance: If a foreclosure may be resulting because of a temporary loss of income, the lender may agree to forbearance. Forbearance is a short term temporary suspension of your payments or a reduction of your payment amount. You may also be able to negotiate a payment plan to make up for missed payments over the course of several months.
3. Loan modification: This is a procedure when a loans payment plan is altered due to the hardship of the borrower. This can include the rate, term and monthly payment amounts. With a loan modification, then lender will agree to allow the homeowner to add the amounts due to the back of the loan. This agreement may consist of adding all penatlites and past-due payments to the remaining principal.
4. Refinance: If there is still a considerable amount of equity in your home and you are not far behind on payments, this may be an option. The lender would typically refinance the existing loan and will include the new loan plus any late payments, and fees that you would need to regain control. The new amount with all fees would all be included in one mortgage. The main challenge that most homeowners face is they have leveraged their home to the max.
5. Deed-in-lieu: If you have incurred a long term financial hardship and your house has been on the market listed at fair market value for at least 90 days, you may be eligible for a deed-in lieu of foreclosure. For Deed in Lieu Foreclosure you must complete a financial package similar to that of a Short Sale Request and also provide a copy of your recent active listing agreement. There cannot be any additional claims or liens against the subject property. This procedure allows you to transfer your property voluntarily to your lender or Mortgage Company and your debt or deficiency may be forgiven. THIS WILL NOT SAVE YOUR HOME.
6. Short sale: A short sale is a negotiation with your current mortgage company to accept a discount on the amount that is currently owed on a property through a sale of the property to a third party.
7. Foreclosure: Is a procedure in which the mortgagee (lender) will take ownership (repossession) of the property securing the loan or forces the sale of the mortgagor's (borrower's) property in satisfaction of a debt.
TIP: You do not want to go through foreclosure! There are many serious consequences of going through a full foreclosure proceeding. Your credit will be one of the most significant consequences and it will be ruined by taking a hit by as much as a 300-400 point reduction to your score. You will often be bombarded with phone calls at all times of the day by your lender, and you will have difficulty getting credit cards, auto loans, any financing, and even renting an apartment or another home for the next 7 years.
Yes, we are able to assist you in repairing your credit. We have professionals on staff, including Credit Repair Counselors, Attorneys, and Real Estate Brokers who are experts in restoring good credit. Our credit repair division guarantees their work or you don’t pay!
Can filing Bankruptcy affect my chances of qualifying for a short sale?
We are still able to negotiate the short sale if you have already filed for Bankruptcy. However, Bankruptcy is typically used only as a last resort in a foreclosure situation. We have found that filing for bankruptcy only temporarily delays the foreclosure process and ultimately the property will be sold to satisfy debts to creditors.
What is the timeframe for a Notice of Default in California?
The notice of default (NOD) from the lender, a mortgagee, trustee or beneficiary will file in about 90 days after the initial default in California. Then the lender must then wait another "three months" by statute. From there, the Trustee records a Notice of Sale. The lender then must wait another 21 days to force the sale through its Trustee.