Short sales can be frustrating, daunting and confusing. I am Short Sale and Foreclosure Certified (SFR) and I can help you with this very confusing process. Consulting and keeping you informed has been key in negotiating and closing short sales. I hope this page can explain exactly what a short sale is and what the process is to get a successful closing. Be assured, I will be with you all the way. You can call me day or night, I will be there for you.
What Happens in a Short Sale:
A “short sale” refers to a situation where the owner of the home does not have enough equity in the property and not enough cash or liquid assets to be able to sell the property, pay off liens and selling expenses (e.g., closing costs, property taxes, transfer taxes, real estate commissions) and provide a clear title to the purchaser. In short, there is more owed on the home than what it will likely sell for on the market. Lenders use the term to describe this as a loan that is “upside down.” While many short sellers are at-risk of foreclosure, a short sale can also occur to a seller who bought high and took out a lot of equity and might be forced to sell due to a divorce or job transfer.
If a homeowner facing foreclosure cannot negotiate with the lender to work out a repayment plan or loan modification, a short sale can be a viable option. Many consider a short sale better in the long run for the homeowner because it avoids foreclosure which will damage a person’s credit score and make it much harder to buy another home in the future.
A foreclosure may stay on the credit report for at least 10 years as it is a court action similar to bankruptcy. However, foreclosure can do even more damage to a credit report than bankruptcy. Ultimately you must prove to the lender that the foreclosure happened due to something beyond your control such as job loss or illness.
It’s ideal if the homeowner who chooses to sell can work with a professional REALTOR® before they are delinquent three months. Within this short window of time, a REALTOR® might assist in negotiations with the lender to place the property on the market and possibly save the buyer any equity left, as well as prevent a foreclosure on their credit file.
Some tips when it comes to short sales:
•Be wary of scams. Consumer groups have learned that advertisements that say “Cash for Houses/Any Situation” or “We Buy Houses for Cash” bait homeowners with the promise of rescuing them from imminent foreclosure. Unfortunately, the “rescue” often involves the borrower signing over title of the house to a different person or entity, thus, and the family ends up being evicted from their home.
•It is important that sellers work with a licensed Illinois REALTOR® to sell their home. REALTORS® are in the business of helping homeowners and have the expertise to guide them through a tough situation. A REALTOR® has the expertise to develop a reliable Comparable Market Analysis (CMA) to determine the current fair market value of the home.
•Understand the tax implications of the decision to sell short and consult with a tax advisor.
There will be paperwork and research required of you in this process. First you have to locate your mortgage documents to understand the terms of your loan. If you have authorized an attorney or REALTOR® to act on you behalf in the sale of your home, the lender will need a letter of authorization. Other documentation required by the lender includes:
•Financial Disclosure Form
•One-page “hardship letter” explaining how you got in this position
•Last two months pay stubs
•Copies of most recent two months personal checking account statements for each borrower on the loan
•Copy of signed last two years’ personal tax returns
Yes, the short sale will require time and consultation with the appropriate legal, tax and real estate professionals. It can take from two weeks to as long as 90 days to receive an approval of a short sale from a lender. But usually it’s a much better option than foreclosure given the impact to your credit history.
Sources: Illinois Association of REALTORS®, National Association of REALTORS®, REALTOR® Will Weaver of the Floyd Wickman Team
How to Qualify for a Short Sale in Illinois:
Illinois homeowners are required to show a legitimate cause for a financial hardship before being qualified to sell a property under terms of a short sale. The hardships that qualify for an Illinois short sale are numerous and most homeowners who are not able to make payments on a house are in such circumstances because of one of the qualifying conditions. Lenders are not likely to argue over short sale terms with anyone meeting Illinois hardship qualifications.
Match your hardship case against the acceptable causes outlined for Illinois hardship qualifications. The most common hardship causes Illinois recognizes include job loss or reduced income, business closure, divorce, illness and medical expenses, death in the family, military duty, any change in your mortgage terms that you cannot afford and the inability to physically keep up your home.
Contact your mortgage lender to request an Illinois short sale under the terms of your qualifying hardship. Ask your lender about a short sale even if you do not have a qualifying hardship. Wait for an approval form the lender to market the home for less than you currently owe on the balance of your home loan. A bottom-line low sale price may be stipulated by the lender.
Contact the Illinois Attorney General's Consumer Protection Division for assistance if you are denied a short sale by your lender. Illinois homeowners are protected by several state regulations (see Resources). Most homeowners are not denied a short sale, since it saves the lender a considerable amount of money over the cost of foreclosure and resale
Short sale incentive program:
The Home Affordable Foreclosure Alternatives Program (HAFA). HAFA helps homeowners who are unable to retain their home under the Home Affordable Modification Program (HAMP), by providing incentives for short sales and deeds-in-lieu of foreclosure rather than foreclosure.
Please contact me for a short sale consultation if you feel this is the right solution for you. I always preach that education is key.
Thank you very much for visiting my page. I wish you the best in your home selling process.