This is a very heavy question. CTRagents.com LDS Realtors have been doing short sales for clients that have no other choice but to sell their home when they cannot make their mortgage payments and the lender is not willing to give them a loan modification they can afford.
Is it worth it for everyone?
An average short sale from the time we take the listing to close escrow, run approximately 3 – 7 months and in some cases longer. Although it takes time and patience to sell a home as a short sale, it will help save a homeowner’s credit. For instance, under the current lending guidelines if a homeowner foreclosures on their home, they are ineligible for a Fannie Mae backed mortgage for a period of 5 years. If a homeowner sells their home as a short sale, they are eligible for a Fannie Mae backed mortgage loan after only 2 years.
An Investor who allows a property to go to Foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 years. An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.
On any future 1003 home loan application, a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 that asks “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?” this will affect future interest rates. There is no similar declaration or question regarding a short sale.
Credit Scores may be lowered anywhere from 250 to over 300 points for a Foreclosure. A Foreclosure will typically will affect credit scores for over 3 years. Only late payments on mortgage will show with a short sale and after the short sale is completed, it will be reported as paid or negotiated for less than the amount owed. This will lower credit scores as little as 50 points if all other payments are being made. A short sale’s affect can be as brief as 12 to 18 months.
Foreclosure will remain as a public record on person’s credit history for 10 years or more. Short sale is not reported on credit history. There is no specific reporting item for ’short sale.’ The loan is typically reported ‘paid in full, settled.’
Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. If a client has a foreclosure and is a police officer, in the military, in the CIA, Security, or any other position that requires a security clearance in almost all cases clearance will be revoked and position will be terminated. A short sale on its own does not challenge most security clearances.
Employers have the right and are actively checking the credit history of all employees who are in sensitive positions. A foreclosure is many cases are grounds for immediate reassignment or termination. A short sale is not reported on a credit report and is therefore not a challenge to employment.
Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment. A short sale is not reported on a credit report and is therefore not a challenge to employment.
In 100% of foreclosures (except in those states where there is no deficiency) the bank has the right to pursue a deficiency judgment. In some successful short sales it is possible to convince the lender to give up the right to pursue a deficiency judgment against the homeowner.
In a foreclosure the home will have to go through an REO process if it does not sell at auction. In most cases this will result in a lower sales price and longer time to sale in a declining market. This will result in a higher possible deficiency judgment. In a properly managed short sale the home is sold at a price that should be close to market value and in almost all cases will be better than an REO sale resulting in a lower deficiency.
Will a short sale benefit a Realtor?
YES, the LDS Realtor involved in a short sale is paid a commission. The LDS Realtors commission is paid from the homeowner’s lender that agrees to the short sale. A short sale should never cost a homeowner a penny. All closing fees are paid by the homeowner’s lender.
This is the bottom line, a short sale helps everyone. It helps the homeowner save their credit and the many other items we have shared. It helps a Realtor in these hard economic times earn a living and provide for his or her family. It helps new homeowner because most lenders will sell a short sale at a 10 – 15% discount off the current market values. It helps the lenders who are not receiving mortgage payments to get a non performing asset sold. On average a foreclosure will cost a lender $40,000 – $80,000 more then a short sale.
Is Short Sale the answer to owners who cannot obtain a loan modification they can afford?
YES
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