Curious about short sales? Here's some things you should know...
PURCHASING A SHORT SALE
Generally speaking, we recommend taking on the "not-so-challenging" road of purchasing a foreclosure property rather than the daunting and arduous task of purchasing a short sale. However, in recent weeks as short sales become more and more common, some of them are becoming slightly more manageable. If you are determined to purchase a short sale, don't go it alone! We're here to help. Here are some things that you need to know up front:
- Your chances of having your offer approved are multiplied if there is only one lender involved. Having multiple lenders complicates the situation and just means that more people/steps/processes are thrown into the mix.
- Even with only one lender, approval takes TIME. If you don't have an undetermined amount of time to buy this home, this might not be a good idea for you.
- Go ahead and start with your highest and best offer. Unlike a typical real estate deal, short sales rarely leave room to negotiate. They will see plenty of offers, and they are going to take the one that nets them the highest dollar. This amount may be exponentially more or less than it was listed for on MLS.
TURNING YOUR PROPERTY INTO A SHORT SALE
If you're getting to the point where it is becoming harder and harder to make payments on your home, you should consider a short sale. Short sale is not easy, but it will be better in the long run than a foreclosure. The trick is getting the bank to approve your short sale instead of just continuing to collect your payments, until they stop, and then foreclosing on your property. This is not a simple series of steps - you should consult professionals! If you've made your decision to try for the short sale, here are some things that you will need to know:
- Having only one lender improves your chances of having your short sale approved. If you have 2 or 3 lenders, you are going to be working a lot harder.
- If you do have more than one lender, you should be aware that other lenders will likely be receiving some proceeds of the sale...whereas with a foreclosure, typically there are no proceeds to be had.
- If you are requesting full debt forgiveness, your short sale is less likely to be approved. Instead, try asking for an unsecured note to pay the deficit of what you owe the lender. This will look like a better effort to them, and they are much more likely to approve.
- Ask for short sale while you are STILL CURRENT IN YOUR PAYMENTS! Once you get behind on payments, it's too late. Foreclosure will happen long before you can get a short sale approved.
- Every step will be a "hurry up and wait" game. Moving as fast as possible on your end will increase your chances of getting a short sale approved, but don't expect the bank to move as quickly.
- There is a LOT of paperwork involved. Just get all requested documents back to the lender as soon as possible.
- You have a great chance of having your short sale approved if you have had some kind of life change that has led to the financial issue. A few examples of this would be divorce, job loss, disability, forced relocation, death of a spouse, etc.
- BUT - before you begin claiming that you have all these problems, be absolutely positive that you can prove every claim that you make to the bank. Don't say that you got a divorce if it was separation. Don't "fudge" on your salary. Don't claim job loss if you just got demoted. This is a time that it is absolutely paramount to tell the truth, the whole truth and nothing but the truth!
- If you don't tell the truth, know that you could be prosecuted for loan fraud. It's becoming more and more common. If you've already told a few white lies, you need to seek legal advice promptly, and before any other communication with the bank is made.
- If any of the debt is excused, you could owe taxes on the portion that was forgiven. Do your research on something called the Debt Forgiveness Act, and be sure you have a tax advisor who knows exactly what this is.
- Your credit will take a beating for this. Sometimes, short sale or foreclosure is a necessary evil, and in most cases, having a short sale is easier on your credit than foreclosure. Either way, you will probably never be able to buy another home without putting at least 18% down.
Clearly, there are three professionals whose advice you should seek before making the final decision: a tax accountant, a real estate agent and an attorney.
If there is any way possible that you can continue making your payments, DO IT! The economy will eventually get better, and if you're able to wait it out, this is surely your best bet.
Roxanne & Shannon Moore are a mother-daughter team selling real estate in Charlotte and Sarasota Counties including-North Port, Port Charlotte, Englewood, Venice, Osprey, Nokomis, Sarasota, Punta Gorda and Boca Grande. Please visit our website at www.TropicalFloridaProperty.com