What is a Short Sale?
A short sale is a transaction that allows the sale of a property for an amount less than the amount owed to the bank. The bank in return accepts the proceeds as settlement of the debt.
How long does it take to close a Short Sale?
It depends on the property location, the lender's and other factors, but in general from the time of contract a short sale should close in 60-90 days.
What happens to the seller's credit rating when they short sell their property?
Typically the loan will show up as "paid" on their credit report; however there will be a notation that says "settled for less than originally owed" or something along these lines. It is more favorable for a homeowner to short sell than to have a foreclosure or bankruptcy on their credit report. A short sale will affect the credit of the seller for approximately 2 years where a foreclosure or bankruptcy will affect the seller's credit for 7-10 years.
What documents does a seller include in a Short Sale package?
Documents depend on the lender. Each lender requires different documentation. AFS will need an authorization from the seller to discuss your file with the lender. The seller will be required to supply financial information, bank statements, pay stubs and government required documents. AFS will supply you with the complete package and work with you.
Are there different treatments for Short Selling a property that is your primary residence vs a property that was purchased as an investment?
A primary residence might receive the HAFA treatment which has proven quite effective assisting the homeowner's transition. The investment property is not eligible for HAFA. Consult with your AFS representative for more specific information.
Will the borrower have to pay taxes for a Short Sale?
The borrower may pay extra income tax if the bank sends a 1099 for the deficiency. If the subject property is the borrowers Primary Residence then the taxes on the 1099 will be calculated based upon the Mortgage Forgiveness Debt Relief Act of 2007 HR3648. Currently this act expires December 31, 2013.
What percentage of mortgage companies send someone out for an appraisal on a possible short sale?
All lenders order a Broker Price Opinion (BPO) or full appraisal of the property before making their decision to accept or reject the short sale offer. This is their only way of assessing the value of the property.
Can an owner profit from a Short Sale?
The seller cannot profit from a short sale.
How do bankruptcies affect the possibility of doing a short sale?
Most mortgagees won't consider a short sale if the homeowner is in the process of bankruptcy. After the bankruptcy is completed the short sale can be completed. The loan modification process can be frustrating and confusing for many distressed homeowners. If you are considering contacting your lender about a loan workout to avoid foreclosure, you need to get as much information upfront as possible so you will be prepared and able to present your case in the best possible light.
What is a loan modification?
A loan modification is a permanent change in one or more terms of a borrower's home loan, allows the loan to be reinstated, and results in a payment the homeowner can afford.
Can the lender include late charges in the Loan Modification?
Per HUD, the accrued late charges should be waived by the lender at the time of the loan workout-this varies depending on the type of loan-but always request a complete breakdown and description of all fees and penalties from your lender.
Can the bank require an interior inspection of the property if they have concerns about the property condition?
Yes, the lender may conduct any review it deems necessary to verify that the property does not have physical conditions which might adversely impact the value.
How do I know if I will qualify for a loan modification?
The number 1 criteria your lender is looking at is your ability to make the new modified payment now and in the future. You need to supply the lender with proof of your income, along with a complete and accurate financial statement detailing your income and expenses to show them that if granted the modification, you will be able to afford the new, lower payment .
Do I have to be currently delinquent on my payments to get a loan modification?
Most lenders are now accepting applications from homeowners who are not currently delinquent, but who are able to prove to their bank that due to imminent interest rate increases, they will no longer be able to afford the loan payment under the terms of their loan. It is advisable to contact your lender as soon as possible to start the loan modification process, regardless of if you are delinquent or not.
What is an acceptable Hardship situation?
Each homeowner has a unique set of circumstances that caused them to fall behind on their home loan, but generally the lenders consider divorce/separation, loss of income, death of spouse, co borrower or family member, illness, job relocation, military service to be acceptable reasons to consider a loan modification. A compelling hardship letter included in your application is a very important part of a successful application.
Will a loan modification help me stop foreclosure?
Yes, that is the goal-by working with your lender to find a loan workout solution, your loan is brought current and the foreclosure process is halted.
Can my missed payments be added back into my new loan modification?
Yes, the arrears can be added to the new loan balance and spread out over the term to allow the loan to be brought current.
Can I do a loan modification myself or should I pay someone to represent me?
That is entirely up to you and your comfort level with dealing with your lender, but also your current financial situation as most loan modification companies require a large upfront fee. Regardless of what you decide, the first thing you should do is learn all you can about the process, your legal rights, and what it takes to get your application approved.
So how do I get started to modify my loan?
Before contacting your bank's loss mitigation department or a loan mod company, do your homework-learn as much as you can about the loan modification process so you can make informed decisions.
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America's Fresh Start, LLC
America's Fresh Start, LLC (AFS) is not a law firm and none of its employees are attorneys.
AFS does not offer legal advice. AFS works for and with law firms for any legal advice and assistance.