To Short Sell or not to Short Sell, that's the question
You have probably heard about the term Short Sale (SS) by now. This is when a seller (usually one who is in a current financial hardship) attempts to sell their home that is worth less than the amount they owe on their mortgage. The bank needs to approve the loss that they are taking as a result of the sale, and once they approve, the SS can close with a new buyer in place.
There are 7+ million households in trouble today – either this means that the household is either late on their payments, or the foreclosure process of the home is already in effect. The sad part is that for about half of the homes that get foreclosed in this country the owners didn't do (or know to do) anything about it. Banks today are hurting and NEED to seek alternatives other than foreclosure, and a successful SS has become the preferred process of absorbing the immense amount of distress sales that are mounting throughout the country.
In a short-sale, the seller remains the owner while negotiations are made with the bank regarding the terms of the sale and how the sale will affect the financial future of the seller. Of course you would be ill-advised to go about this on your own; you would want someone who is experienced and tenacious when dealing with a large financial institution and your financial future on your side.
I have been successfully negotiating short-sale transactions since 2006 (before most large banks even had SS departments) You don't become a short-sale expert by taking a weekend class; it comes from experience through the total amount of short sales you have successfully closed and how well the clients ended up after all is said and done. Moreover, owners that are in financial hardship today need to know that there are several options to assist depending on your situation and what you want to accomplish. Many people stick their head in the sand and choose to ignore all the bad stuff that is going on around them and let their home get foreclosed right from underneath them. Foreclosure destroys your credit and is the worst thing you can do to yourself. On the other hand, doing a short sale is the best thing you can do for yourself assuming that you have researched and tried to seek alternatives to stay in your home. There are government programs for helping with keeping homeowners in their home and people in general need to know that programs like these exist and that they are a viable option. For many homeowners, the hardship is too severe to justify staying in the property no matter how the terms of the loan are readjusted and a short sale becomes the most logical and reasonable solution.
Doing a short sale can be really easy, but for many people it's a lengthy and stressful process. They used to be near impossible to do because there was no set precedent on how to deal with them just a few short years ago. Nowadays, every bank has dealt with Short Sales, and most have beefed-up teams of personnel dedicated to the processing of these short-sale files. As a result, the more Short Sales that get approved and closed, the more regular the process is, and the majority of all banks will do them in a similar manner, making it easier for the agents to setup files for success upon the initiation of a SS.
It goes without saying, but a short sale will affect your credit and can have significant tax and legal ramifications. Your agent should be advising that you speak to the necessary professionals to get you informed on where you stood and what your risk is in terms of the consequences you may realize if you go the SS route. In my experience the majority of my clients are better off doing a SS. Its seldom that they are actually better off doing a foreclosure. Your situation will be determined based on the history of your loan (did you refinance?), And the status of occupancy of the home in question (are you an owner-occupied or investor?), Among other things. Depending on the state that you live in, these determining factors change how the banks can or may go after you, so you want to make sure that you are making the right decision from the onset.
Most people will benefit from the short-sale, and my best advice is to find someone that has dealt with banks a lot. If your Realtor is a friend but doesn't know the first thing about Short Sales, pardon the relationship and go with a pro unless you want to risk losing your friendship because they did you wrong in negotiating and communicating with the banks. The banks are keen on what they can carve out of you throughout the process and a less-experienced agent may cost their clients a lot of money, whereas an agent like me rarely, if ever, sees a seller contribution required in order to get short -sale approval.
Nowadays, the government has rolled out a short-sale program that is the program you will want to opt for initially with your agent, because if you can qualify, it's the best deal in town. The Home Affordable Foreclosure Alternative (HAFA) program is the government sponsored program that has been implemented this year to assist distressed homeowners to short sale their home quickly without legal consequences and with some cash in their pocket for move out expenses. This is by far the most promising and beneficial program to date and this is only getting more pervasive as more and more homeowners find out that they have options. With this program, not only you can gracefully remove yourself from your home and mortgage obligation, you will do so without any legal recourse from the bank. In other words, the bank cannot come after you after the short-sale no matter what, and they will give you $ 3000 for move out costs after everything is said and done. This is a big departure from a regular short-sale in which the bank wants to see absolutely nothing going to the homeowner (and it makes sense because the bank is taking a substantial loss – so they figure why should the owner walk away with any money ?) With HAFA, all the potential bad stuff that can happen from a short-sale essentially goes away (not including the hit on your credit) and you end up with cash in hand; that's why this is the best program I've seen to date.
Why does the bank agree to this? A short sale is the best alternative for a bank because they typically net more money with this process rather than a foreclosure. From the numbers I have seen, on average the bank nets 10% more value by doing a short-sale compared to a foreclosure. In a short-sale the real estate agent and seller essentially find the buyer for the property and all the bank needs to do is push the button to approve. Contrast this with a foreclosure where the bank's mounting foreclosure costs, legal fees, holding costs, maintenance and repair, property taxes and paying out a full commission to a real estate broker to list the foreclosure, and you can see why going the short-sale route is a win-win for the bank and borrower alike.
2011 will be a year where the short-sale takes up a majority share of the market. It also creates the most opportune time for someone to do a SS that could desperately benefit from one. No matter what your future holds, my aim is to help you take control of your financial destiny in order to put you in the most advantageous position to succeed. I hope that this information was helpful in getting you clued in on the short-sale market today. Be an advocate for yourself, get educated and take action today. Best of luck!Immobilienmakler Heidelberg Makler Heidelberg
Source by Michael Justin Wolf