San Diego, CA -- (SBWIRE) -- 08/14/2012 -- If you are homeowner who is having difficulty making your monthly mortgage payments you need to consider what options you have. Should you try to keep your home even though you can’t afford the mortgage payments, or should you leave your home and start over? Sometimes it’s difficult to detach yourself emotionally and make the right financial decision. Knowing what a short sale is and how it works will be the first step in knowing if it is the best solution for you.
Let’s first go over what options are available for homeowners struggling with their mortgage payments?
Deed-in-Lieu
A Deed-in-Lieu of Foreclosure is when you transfer your property ownership and title to your mortgage holder in exchange for releasing you from your mortgage obligations.
A Deed-In-Lieu is a foreclosure alternative and is a consideration when:
- You cannot refinance or modify your mortgage
- You are dealing with a long-term hardship
- You are currently behind on your monthly mortgage payments
- You owe more on your home than its current market value
- You either don’t want to or are unable to sell your home
- You cannot afford your home and are ready to leave
Deed for Lease
This option allows you to lease your home on a temporary basis. To do so you must turn over the ownership of your home to your lender (known as a Deed-in-Lieu of Foreclosure) who will then grant a release from your mortgage and payments. You can then sign a lease at a reduced rate and remain in the home as a tenant.
- Rectify mortgage delinquency and avoid foreclosure
- Continue to live in your home
- Rent at reasonable market rate for up to a year, possibly longer
- No security deposit necessary
- Relocation assistance when lease ends
- Fix your credit score quicker than foreclosure
- Buy another home in as little as 2 years as opposed to 7 years with foreclosure
Loan Modification
An agreement with your lender that allows you to change the payment, length or interest rate of your loan. You may qualify for the federal government’s Home Affordable Modification Program (HAMP) for struggling homeowners.
-Reduce monthly payments to a more manageable level
- Restore credit more quickly than a foreclosure
- Continue to live in your home
Forbearance
A special agreement with your mortgage company to delay or reduce your mortgage payments and avoid foreclosure temporarily for a specific period of time.
- Buys you some time to stabilize finances
- Saves your credit from damaging effects of foreclosure
- Continue to live in your home
Repayment Plan
An arrangement made with your mortgage holder which allows you to add the past due balance to your monthly mortgage payments for a specified period of time until your mortgage is current.
- Eliminate delinquency and catch up on late payments
- Avoiding credit damaging foreclosure
- Remain in your home
Refinance
A new mortgage with more manageable terms, payments and interest rates. You may be able to refinance even if you owe more on your property than it is worth, as part of the government’s Home Affordable Refinance Program (HARP).
- Lower payments with a reduced interest rate or adjusted terms of your current loan
- Does not negatively affect your credit
- Allows you to keep your home
What is a Short Sale
A short sale is the process of selling a home for less money than the remaining balance on your mortgage. If your lender allows you to short sell your home, you can pay off most or all of your mortgage balance in the process.
- Reduce your mortgage debt or eliminate it altogether
- Relocation assistance
- Much less damage to your credit than foreclosure
- Purchase another home in 2 years as opposed to 7 years in foreclosure
** Some of these options are designed to help a homeowner stay in their home, while others make it easier and less damaging to exit a home that is no longer affordable.
What is the Short Sale Process?
If you qualify for a Short Sale, the process resembles a traditional real estate sales transaction. A real estate agent will work with you to sell your home and your mortgage company will work in tandem with the real estate agent to:
- Determine market value sale price
- Negotiate with 2nd mortgage holder (if necessary) and collect all financial information
- review buyer offers
- negotiate terms of sale with the prospective buyer’s agent and mortgage lender
It is possible for you to receive assistance with your relocation and moving expenses to aid in the transition to your new residence
Short Sales can take up to 120 days to complete, the time frame can vary depending on your specific circumstances. If your home is not selling you may qualify to transfer your ownership to the mortgage holder, know as a Deed-In-Lieu of Foreclosure.
What are the benefits of a Short Sale?
- Get rid of your mortgage debt
- Avoid Foreclosure
- Rebuild your credit score faster
- Purchase another home in as little as 2 years as opposed to 7 with a foreclosure
Frequently asked Short Sale Questions & Answers
What is a Short Sale?
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 than a foreclosure and or Bankruptcy.
How Long Does a Short Sale take?
This depends on many different factors, such as: who your mortgage servicer is, who the investor on the loan is, how long it may take to get an offer, how many liens you have, if you are behind or current on payments, and the list goes on. With an inexperienced agent or mitigation firm it could take 6-8 months or longer. Our system, experience, and contacts allow us to average a turnaround time of about 60-120 days. We have received approvals in 3 days, however this is not typical. Each scenario is unique and different. Upon receiving and reviewing the hardship package, we can set realistic time frames and expectations for the short sale process.
Why does the Short Sale Process work?
This depends on many different factors, such as: who your mortgage servicer is, who the investor on the loan is, how long it may take to get an offer, how many liens you have, if you are behind or current on payments, and the list goes on. With an inexperienced agent or mitigation firm it could take 6-8 months or longer. Our system, experience, and contacts allow us to average a turnaround time of about 60-120 days. We have received approvals in 3 days, however this is not typical. Each scenario is unique and different. Upon receiving and reviewing the hardship package, we can set realistic time frames and expectations for the short sale process.
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 or less six months from now.
What is the Advantage of a Short Sale?
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.
When should I begin the Short Sale Process?
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!
Do I have to be Behind on my Mortgage to Qualify for a Short Sale?
Yes and No. We NEVER recommend missing a mortgage payment. From our experience, lenders will often ignore a customer&aposs short sale request if the mortgage is current. A short sale is not a advantageous solution for a lender as it means they are losing money. However, the short sale is generally a better alternative for lenders as it normally means they net more than if they let the property foreclose. Without the threat of a foreclosure, lenders do not have much incentive to push a short sale through.
Do I need a Realtor?
Our agents are extremely knowledgeable in the details of evaluating, listing, and marketing short sale properties. As soon as we begin working together, your assigned agent 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 Short Sale San Diego agent due to our experience with the distressed property segment of the real estate market.
Why Should Short Sale San Diego 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.
Can I do this on my own?
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. 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.
How will this affect my Credit?
Credit history is a very complicated issue. There are many factors that determine your credit rating. What we hope to do is to keep a full foreclosure off of your credit report.
What if I declare Bankruptcy?
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 other options do I have?
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. Forbearance: 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 penalties 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&aposs (borrower&aposs) 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 most likely have difficulty getting credit cards, auto loans, any financing, and even renting an apartment or another home for the next 7 years.
Why do lenders allow Short Pay-Off’s?
A Lender or bank takes a discount or agrees a short sale because it saves them money. It gets bad debt off their books so they can reinvest that money by giving out another loan to a customer. On average a Lender loses between $30,000 to $80,000 on each property that they take back as a bank owned property. In many cases a short sale is necessary in order to get you out from under your mortgage debt. By doing a short sale, you will be able to take a large bite out of the money you owe to your mortgage company, so that you are no longer liable for the entire amount.
Information about Short Sale San Diego
Short Sale San Diego is a local real estate company that specializes in foreclosure prevention by providing options for homeowners who are experiencing difficulties with their mortgage. Our knowledgeable agents and short sale negotiation team are licensed by the Department of Real Estate and collectively have over 20 years of experience in the real estate and banking industries. Over the years we have helped hundreds of families and individuals throughout the San Diego area.
We understand the stress that is related to not being able to make your mortgage payment. At Short Sale San Diego our goal is to provide you with the information and options that you need to make an informed decision about what steps you need to take. We make it our number one priority to putting our clients in a better position for the future and we want you to know that we are here for you every step of the way. You can be assured that by choosing Short Sale San Diego you will be partnered with a business that you can trust will provide you with excellent service and results that cannot be matched.
Short Sale San Diego Highlights:
- Highly Experienced & Licensed Short Sale Negotiators
- Knowledgeable Agents that Specialize in the San Diego Market
- We Do Not Charge Anything for our Service
- Alternative to Foreclosure
Regain your Financial Freedom:
If you would like to find out more about Short Sale San Diego or would like to schedule a free consultation with a Short Sale San Diego agent, call us at 619-825-0000. We are more than happy to explain how the short sale process works and together decide if Short Sale San Diego is the right company for you.
For more information on this press release visit: http://www.sbwire.com/press-releases/a-homeowners-guide-to-real-estate-short-sales-158558.htm