Real Estate Short Sales 101
Should I Consider A Real Estate Short Sale?
There are many ways to lose a home in today's economy. As a homeowner pride of ownership is a major factor when making hard decisions on what to do about dealing with the foreclosure of your home or investment property. To ignore your rights as a homeowner by letting your home go into foreclosure without an opportunity to sell it will most likely destroy your credit for the next seven years. There are alternatives to avoid destroying your credit with foreclosure proceedings. One of those options is called a "Short Sale."
Short Sale is when a lender is willing to accept less than the total amount due on the mortgage loan(s) you owe. Not all lenders will accept a short sale or discounted payoffs, especially if it would make more financial sense for the lender to foreclose since not all sellers nor all properties qualify for a short sale.
If you are considering selling as a short sale, there could be drawbacks. For your protection, Teddy Castro Group - NeXGen Real Estate suggest that all sellers:
Obtain legal advice from a competent Real Estate Attorney
Obtain legal advice from a competent Bankruptcy Attorney
Call an accountant or tax attorney to discuss short sale tax ramification
Frequently Asked Questions
What is a short sale request?
A short sale request is when our company asks your mortgage company if they would take a discount on the amount that they are owed on a property.
Why does the short sale process work?
Your mortgage company runs different scenarios on your property to determine what they will get for a return on their investment. Your mortgage company takes the following factors into consideration:
1. The foreclosure process costs money for legal fees.
2. They most likely will need to pay real estate fees of up to 6% of the selling price of the house.
3. There are holding costs involved i.e. How long will the house stay on the market?
4. They may have to make their own repairs on the property.
5. They have to carry property insurance, HOA Fees, regular maintenance.
For these reasons the bank is willing to take less than that what is owed on a property. The question we ask the bank is “Do they want their money now?” or “Do they want the same amount of money or less than they can currently in six months from now?”
Why should I, the homeowner let you do this? What makes you different than other companies?
The foreclosure process can be very fast if ignored. It is important that the homeowner be made aware of this fact. Teddy Castro Group - NeXGen Real Estate is a licensed real estate company that provides a service that specializes in pre-foreclosures and bank owned properties. We make it our business to know the foreclosure process and to help sellers and communities move forward from the financial hardship of having a foreclosure. Getting a short sale form a bank is a very time consuming and can be a complicated process. We are aware that there are other real estate companies out there doing this, but the important thing is for the homeowner to feel comfortable with the company they choose to sell their home to.
Can I do this myself?
Yes. However, the process can be complicated, even if you know the right questions to ask. Obtaining a short sale is only part of the process. Finding someone to fund out, or purchase the house at a discounted price within the allotted time given by the bank is another part.
What are some of my other alternatives?
Our company is not a tax advisor, an attorney, or a representative of your bank or mortgage company. However, some of you other options are as follows:
- Pay off your mortgage.
- Refinance your existing Mortgage
- Modification with your existing Mortgage Company
- Payback your late payments with a Forbearance program offered by your Bank/Mortgage company over a scheduled period of time.
- Sell the property yourself within the allotted time before the scheduled foreclosure sale date.
- Hire a real estate company to sell the property before the scheduled foreclosure sale date.
- Qualify for a Deed In Lieu of Foreclosure with the Bank/Mortgage Company.
- Allow your home to proceed into Foreclosure with possible financial and credit responsibilities.
How will this affect my credit?
Credit history is a very complicated issue. There are many factors that determine your credit rating. What we want to achieve in keeping a full foreclosure off of your credit report.
Can I repair my credit?
You can repair your credit. There are many different companies that can help you with this process. The cost ranges from $35.00 to several thousand.
How much money will I receive from this process?
If a mortgage company takes a short sale on your mortgage you will NOT receive any funds from the sale. The reason is that your bank is going to request a HUD Statement which is federal form to be signed by you from the sale. The mortgage company takes a position that if they are going to take less than what is owed on a property, then you should not receive any money from the transaction. If we were to show you receiving no money on the HUD Statement that we provided to the bank, and then we were to give you money. Both you and Teddy Castro Group - NeXGen Real Estate would be guilty of federal fraud.
How long does this process take?
The entire process can take from 60 – 120 calendar days. However, there are some variables that may speed up or slow down the process. They are as follows:
- Teddy Castro Group - NeXGen Real Estate packages your request with all required information requested by the bank so that they have all the needed info in front of them to make a good decision on your short sale request. Speed up Process.
- Banks may have done some of the preliminary work before we contact them. This work includes an exterior value of the home by appraisal or realtor for market evaluation. Speed up Process.
- Banks are overloaded with request and can be very difficult to get in contact with and are not good at returning phone calls. Slow Down Process.
- Time is of the essence in which you will need to provide information required by the bank to our company as quickly as possible to avoid any delays. Speed up Process.
- Buyers that make offers may have been qualified at time of offer, but can be declined by their bank because of unforeseen circumstances. Slow Down Process.
- Your bank may not approve the buyers offer because it was too low for their acceptance. Even though home is currently at the market value for the area. The bank has requirements that need to be met in order to sell and approve a short sale. It is at their discretion and cannot be foreseen since every loan and bank is different. Slow Down Process.
- May need to put the home back on the market and start all over again with a different buyer and in some cases restart the above processes with the bank. Slow Down Process.
Yes, we need to create interest in your property and your local neighborhood is a good place to start. Signs also make it easier for our investors and buyers to spot the house.
Will Teddy Castro Group - NeXGen Real Estate be marketing my home effectively to sell before foreclosure?
Yes, we have a marketing plan in place for every property that is listed with Teddy Castro Group - NeXGen Real Estate. Some of these sources are flyers, public advertisements, online searches, email marketing campaigns, website integration with other real estate companies across the country, and local realtor search websites will all be used to get the best and most agreeable offer for you and the bank to accept.
Will I have to deal with anyone else in regard to selling my home as a short sale?
Teddy Castro Group - NeXGen Real Estate does work with 3rd party companies to assist in counseling sellers on their options of saving their home or to recommend selling as a short sale if necessary. They are not directly affiliated with Teddy Castro Group - NeXGen Real Estate but are a vital resource for our company and you as a seller in understanding your options of foreclosure rescue and in negotiate short sales with the banks. These 3rd party companies sometimes do have separate fees and requirements that are required for them to specifically negotiate your short sale. They are only a part of counseling and negotiating with the bank and not listing your home. Teddy Castro Group - NeXGen Real Estate will be the listing broker for your home.
*These answers are accurate but not guaranteed due to all Mortgage Companies, Banks, Municipal, City, County, State and Federal laws differ.
Mortgage Debt Relief Act