Frequently Asked Questions or FAQ’S About Short Sales
- Explain the foreclosure process and what the term “Short Sale” means.
A short sale is when the lender allows you to sell you house for less than what you owe. Lenders prefer it to a foreclosure which is a legal process for them to take back the title to your house. Foreclosure can take up to a year after you stop making payments and will cost the lender more than if you participate in a short sale.
- When does the lender realize that there is a problem?
As soon as you are 30 days late, they will call and send collection letters. At 90 days late most of them will file a lis pendens which is a foreclosure law suit. This lets the public know and you will get calls, letters and people at your door. Don’t panic and get taken advantage of.
- What if the problem that got you behind on the payments gets solved quickly, like you lost your job and found another one right away?
You can do a Loan Modification which is a permanent change of 1. A reduction in the interest rate 2. Forgiveness of a portion of your principal. Or 3. Extension of the maturity date of the loan or a similar combination. For example if your mortgage was 30 years, at payments you could not afford, maybe your lender will change them to 40 years and lower the interest rate to payments you can afford. It all depends on your lender. We can help you determine if you are a good candidate for a Loan Modification or a Re-Finance at no charge. One of the best programs we are seeing is the FHA Streamline Option.
- If you can’t make your payments what should you do?
Don’t ignore the problem! If you don’t participate, the process will move on without you and do more damage to your credit and future employment. Call a Realtor who is a CDPE, Certified Distressed Property Expert. We have 3 in our RE/MAX Experts office that are professionally trained and have successfully closed many “Short Sales”, representing both buyers and sellers, negotiating with various lenders. It costs you NOTHING. A Realtor will negotiate with the bank for you and get paid by the bank when they sell your house to a new buyer. Never pay anyone upfront to help you!
- What is the difference between a foreclosure and a short sale?
There’s A HUGE difference! If you allow yourself to be foreclosed on you won’t be eligible for a new Fannie Mae or a government backed loan for 5 years. Your credit score will be lowered as much as 250 to 300 points. It will remain on your credit history for 10 years or more and the bank has the right to pursue a deficiency judgment. A foreclosure can also affect your current and future employment. If you are in a sensitive job like bank teller or cashier, the military, law enforcement or work for a government contractor that requires security clearance you could lose your job or be prevented from getting one due to a foreclosure. Like a felony it follows you for many years.
-In a short sale a home owner who successfully negotiates and closes a short sale can get a new government backed mortgage in 2 years, not 5. The credit score can go down as little as 50 points not 300. A short sale is not reported in a credit history so it’s not a challenge to current or future employment. It’s possible to convince the lender not to pursue a deficiency judgment against you. In a short sale your home should sell sooner which will result in a lower deficiency.
- I’ve heard the term “Short Sale Flipping”. What does that mean?
A Short sale flip is when an investor negotiates a short sale with a bank and then sells the same home to a new buyer for more money within a day or two making thousands in profit. It usually involves fraud on the part of an investor, realtor, appraiser, lawyer, title company or even the new lender. The seller and their lender, the buyer and the new lender are all losing to the scammers collecting dishonest fees and profits. When a legal, successful short sale is facilitated the realtor’s fee will be paid by the lender on the homeowners behalf along with the other usual seller costs.
- What can you do to help your Realtor sell your house sooner?
First don’t abandon your house and second, we Realtors say: “It’s a price war and a beauty contest!” The realtor will help you price your home correctly but the owner has to make sure that the home looks and smells good. Lenders will only accept a short sale contract from a professional realtor, after time on the market showing this is the highest and best price available. Realtors assume the burden of communicating with the lender. As skilled negotiators we attract and package offers acceptable to lenders and present them on your behalf.
- How do you recognize the scammers and fraudulent people?
They ask for money up front, they ask you to sign a deed or other paper that gives them title rights to your property. What they promise sounds too good to be true. They pretend to have special skills and connections. Once they have control of your property they can evict you and lease your house to someone else, collecting the rent and not paying your mortgage. Unfortunately there are a lot of bad people giving bad information.
- Is it true that ethnic groups are more vulnerable?
Yes, they tend to trust people who speak their language and some are taking advantage of homeowners in distress. They are advertising everywhere with false promises, charging large fees and making an unfair profit on your misfortune and confusion.
It doesn’t help that the Government’s HUD website has an incomplete translation for “Foreclosure” as “Execution”. Instead of, “Ejecucion” (Sentenced to be killed), it should be “Ejecucion de Hipoteca” (Execution of Mortgage). The term “delinquent” in many countries often translates as “you go to jail”. In English there are two translations of the word delinquent. It means that you are late on a payment but also a juvenile delinquent is a young person who breaks the law. When you are late on a payment your ACCOUNT IS DELINQUENT, NOT YOU!
- Anything else we should know to help ourselves and our family and friends?
DON’T PANIC! Call a Certified Distressed Property Expert, CDPE as soon as you realize you have a problem and there is time to sell your home and save your credit and possibly your job and future job prospects. DON’T BE A VICTIM! TAKE ACTION TO HELP YOURSELF!
For more information go to www.CentralFloridaExperts.com