Short Sale Questions
1. What is a Short Sale?
When a bank agrees to a home sale for less than what's owed to them.
2. Are Banks really approving Short Sales?
YES! Between 2008 and 2012, Short Sales made up a significant part of the sold real estate transactions here in SWFL. According to Lender Processing Services inc. ( LPS ) They even surpassed foreclosure sales here in Florida. As long as the owner and the lender (the bank) agree that a Short Sale is acceptable, The banks have greatly sped up the Short Sale process, are requiring less paperwork to prove hardship for primary homes. Even 2nd homes and investment homes may still be able to qualify for a Short Sale. Freddie Mac and Fannie Mae own or guarantee approx. 60% of U.S. home loans. They are now requiring banks to decide on Short Sale offers within 60 days.
3. Why would a bank consider doing a Short Sale instead of just Foreclosing on the property?
Banks are trying to put the "Robo Signing" scandal behind them. Amid allegations that Banks foreclosed using improper documentation and forged paperwork, The five largest banks agreed to a $25 billion dollar settlement of the allegations. The foreclosure process is long and expensive. With a Short Sale, the process can be much faster and less expensive for the Bank. Since the homeowner voluntarily signs the title transfer, it is also less likely that the title will be cloulded by an improper foreclosure. Short Sale also typically sell for more than a foreclosed home.
4. Will I owe the bank the difference from the amount of the sales price to what is owed?
Only your lender can determine what terms they will agree to.
ALL terms are subject to the lender's approval. However, many times the bank will waive the entire deficiency amount at closing.
Short Sales with two different banks are much more complicated. Both lenders
will need to agree to all the terms. Sometimes one of the lenders may require a
small cash contribution. If a "lump sum" is not possible, they will sometimes accept small monthly payments on
that greatly reduced debt. On most of the Short sales I've worked on, even with two lenders, no cash contribution, or note was required - and the owner still had no deficiency at closing! Your chances for a
approved Short Sale with your debt waived is better than ever!
5. Will a Short Sale hurt my credit report? Will I ever be able to buy another home?
Yes, any time you are late or miss a payment to your bank, your credit score could be negatively affected. The sooner you can settle your debt the better. A Short Sale on your record will hurt, but may be better than a foreclosure on your record. Each person's situation, and credit report is different. One of the best ways to determine the time frame to buy another home, is by talking with a well established, local Bank or Mortgage Broker. Below is the approximate time frame to buy a home after a Short Sale. Remember, guidelines as well as interest rates change all the time.
- 0 days hard money - Bankruptcy, Foreclosure or Short Sale
- 0 days FHA - as long as all your mortgage payments were made on time during your Short Sale.
- 0 days VA - as long as all your mortgage payments were made on time during your Short Sale.
- 1 year FHA - if you have a foreclosure against your record.
- 1 year FHA - from the time your bankruptcy is discharged - final.
- 1 year VA - if you have a foreclosure against your record.
- 1 year VA - from the time your bankruptcy is discharged - final.
- 1 year USDA - Chapter 13 bankruptcy.
- 2-3 years Conventional - from the date of your Short Sale or bankruptcy final discharge.
- 3 years Conventional - from the time your property was foreclosed.
- 3 years USDA - Chapter 7 bankruptcy, foreclosure or Short Sale.
6. If I decide not to try a Short Sale, and file for bankruptcy, how long will it stay on my credit report?
Bankruptcies and foreclosures can remain on a credit report for seven to ten years. Some lenders will consider a borrower earlier if they have reestablished good credit. The circumstances surrounding the bankruptcy can also influence a lender's decision. For example, if you went through a bankruptcy because you lost your job, a lender may be more sympathetic. If, however, you went through a bankruptcy because you overextended personal credit lines and lived beyond your means, the lender may be less inclined to be flexible. Our economy really was hurt bad here in Florida, so many lenders take that in account.
Is there a real estate agent with years of Short Sale experience available in Lee County FL?
YES! Andy Lussier of Virtual Florida Realty, Inc. has been serving Lee County Florida since 1993. He has also been helping owners avoid foreclosure with a Short Sale since 2003! Call or text 1-239-826-7253 (SALE) or email: ShortSale@VFLR.com
Short Sale are still around, but not nearly like it was. Prices have gone up significantly since 2011! Owners are starting to see equity again. The future of tax relief on forgiven debt is unclear. It is recommended that you address all legal, tax and title related questions to a licensed attorney, CPA and/or title agent.