Short Sale Services

Short Sales & Foreclosures   |  Military & Corporate Relocation

What is a Short Sale?

Frustrated? Worried? Not sure what to do? What do you do when you are behind in your payments and unable to keep up? The bank has denied you any and all avenues of repayment or resolve. You may find you are in unfamiliar territory and not sure what to do. You may wonder who to call first - the attorney, the accountant, or the REALTOR®.

If you are a homeowner and find yourself in a situation where you owe more money on your home than what it is worth, having difficult in maintaining your monthly mortgage due to a financial hardship and need relief, you may be interested in pursuing a short sale solution. Basically, a short sale is a type of real estate transaction whereby the financial institution (or institutions in the event that there is a 2nd line of equity) allow you, the homeowner, the opportunity to sell the property at fair market value with the possibility of settling the debt of the balance owed. There are many more complexities, but this is a brief definition. Please contact Rebecca Keeney, REALTOR® for a confidential meeting to discuss your options 

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Short Sales in the Current Market

Our current real estate market is moving towards more and more short sales (homes where the payoff amount is higher than what the home may sell for in today's current market), home owners find themselves in financial hardships. In Hampton Roads, we are looking at an alarming 0% of homes selling at or below city assessment and 0% in a short sale scenario. The below graph shows the increase in short sales and foreclosures within the last 180 days.

What this means to you is that with so many short sales on the market, it would be near impossible to ignore them. With so many financial institutions leaning towards partnerships with 3rd party mediators, and multi-step computerized software streamlining communication from agent to the financial institution, the ease of processing short sales and efficiency in moving through the escrow phase is becoming more prevalent.

However, with this being said, there are still many complexities that are beyond the skill set of the average consumer, placing a greater responsibility on the part of the REALTOR® to provide excellent service and keen negotiating skills in order to successfully close on a short sale. Negotiating with a bank and leveraging in an effort to seek a non-promissory status for the Seller is crucial. It is a very difficult task to keep everything balanced and still assist a homeowner in finding a new residence.

Short Sales are often cumbersome. It requires a strong skill set of attention to detail, proficiency, strong negotiating practices, compassion and understanding. It should be properly planned and executed with the utmost discretion. For military members, there are guidelines, such as the Soldiers and Sailors Civil Relief Act that will provide immediate relief to the military member and protection of their rights. It is very important that you have a REALTOR® who has in depth knowledge about these laws and the ability to guide a Seller through the process. 

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Factors to Consider

There are many factors to consider when deciding whether or not to move forward with a Short Sale. It is a decision not to take lightly. And it is a far better decision than walking abandoning the home.Often times, Financial Institutions, in lieu of additional expenses, will resist a possible foreclosure in favor of a Short Sale. This will greatly ease the burden of additional fees for you in the long term.

Pros

custompagebullet_jpeg No Foreclosure on your Record; Minimal damage to your Credit Score     

custompagebullet_jpeg 2-3 Years before you can qualify for a new mortgage, possibly 1-2 years.

custompagebullet_jpeg  In this fast changing economy, there are numerous professionals available for consultation and services in guiding you through this process, and many at no charge to you.

custompagebullet_jpeg Ability to negotiate a release of the balance through the terms of the contract and waiving of deficiencies or promissory notes. 

custompagebullet_jpeg A Homeowner typically may not accept any profit once so ever from the proceeds of a short sale, however, under certain conditions some institutions may give a relocation allowance to the occupant of the property to assist them in relocating to another property.

custompagebullet_jpeg In some cases, you do not have to be in default when initiating a short sale with your financial institution(s). 

custompagebullet_jpeg The bank usually pays a lesser commission to the Realtor assisting you with your short sale as well as the co-broke Agent representing the Buyer. This benefits you in two ways - you get the expertise of a strong REALTOR® and more Agents will show your property as they are provided commission payment for their services to the buyer.  

Cons

custompagebullet_jpeg Financial Institution may refuse to grant the short sale. 

custompagebullet_jpeg Tax and Credit Score Consequences

custompagebullet_jpeg Your financials and present situation will be under the microscope. However, your REALTOR® will maintain the utmost discretion when processing your account.

custompagebullet_jpeg Length of time to process a short sale (3mos.-1year or even longer)

custompagebullet_jpeg The Financial Institution could still come after you for repayment of the debt for several years following a short sale. Consult a Real Estate Attorney for legal advice.

custompagebullet_jpeg During the escrow, an Appraiser may require repairs to the home before the buyers loan can be approved.These repairs will have to be made and may require further negotiating that could compromise the transaction.

custompagebullet_jpeg A Homeowner typically may not accept any profit once so ever from the proceeds of a short sale, however, under certain conditions some institutions may give a relocation allowance to the occupant of the property to assist them in relocating to another property.

 
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What are some of the positives to buying a short sale?

Foreclosures can be an extremely distressing process for a family. It can take anywhere from six months to over 2 years for a foreclosure to complete. You can opt to file a deed in lieu of foreclosure or seek the assistance of a qualified REALTOR® in pursuing the Short Sale process.Maintaining a consistent communication with the financial institution(s) will provide some relief and control over the situation. By opting to seek a short sale, you lessen increased financial burdens, increased hardship, more damage to your credit report, and ability to cancel a loan that has caused significant financial hardship for you and your family.

REALTORS® assist in processing short sale transactions knowing that you do not have the ability to pay them for their valuable time and services they provide. Realtors do make a commission when selling a short sale, although it may be a lesser amount. With the real estate market having been flooded with short sales and foreclosures, it is becoming inevitable for REALTORS® to avoid short sale transactions. Also, REALTORS® understand the process and empathize with the homeowners. Many REALTORS® truly care about helping people with their real estate needs, irregardless of the type of transaction. Improving the real estate market is always in the best interest of the REALTORS®.

The "wait period"

With the damage to your credit, you may have to wait 1-3 years before being eligible for some types of loans. Wherever you move to during this "wait period", keep in mind the importance of paying your bills on time. This includes utilities and other types of loans. 

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How do Short Sales differ from a Foreclosure?

Proceeding forward with a Short Sale is a far better plan than abandoning your home or risking Foreclosure. A Short Sale can have far less damaging effects to your credit than a Foreclosure. And the ability to bounce back and purchase a new home with a new mortgage after a few years is realistic and something to look forward to. Through placing specific language into the contract, you can avoid repayment of the difference owed to the bank through a promissory note or repayment plan.It will require  Realtor with a strong skill set and experience in processing short sales. 

If you are an active duty military member who had to sell their home through the Short Sale process, you may have special benefits through the Veterans Affairs that will make the process less damaging on both your credit and eligibility status. Contact your Veteran Affairs regional office for further information or contact Rebecca Keeney, REALTOR® for a confidential appointment to discuss these additional benefits.

The bank could require the sale and move forward into foreclosure proceedings. e homeowner to commit in writing to a promissory note to repay the bank for the debt. The homeowner may or may not decline. If the homeowner declines, the bank may refuse to approve the short sale and depending on the verbiage written into the contract you may be out of pocket any prior investment in the form of a home inspection, appraisal fee, brokerage retainers or other monetary proceeds. 

Can my Mortgage Company foreclose while processing a Short Sale?

Unfortunately this has happened. Banks have been known to foreclose on a property while in the midst of short sale proceedings. It has much to do with the left foot not telling the right foot when to take the next step. Allow me to explain, when you are behind in your mortgage, the foreclosure department may periodically evaluate your account to determine if the bank should foreclose. The Short Sale Department may not communicate your actions to the foreclosure department and so, unfortunately, foreclosure results. Never allow anyone to tell you not to communicate with the financial institution(s) that hold your mortgage note. Every month, you will want to call in and check to ensure that your home is not in a foreclosure status.The worst thing you could do is not communicate. 

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Do I have to be delinquent before initiating a Short Sale?

This is not always the case. Under certain conditions and per certain institutions, you may not be required to be in default to get approved by your financial institution for a short sale. Being late >30 days, >60 days, >90 days, and >120 days is what causes most of the damage on your credit report. If you find yourself in unfamiliar territory and facing significant financial hardship making it more and more difficult to maintain your current monthly mortgage, contact Rebecca Keeney, REALTOR® to discuss the possibility of a Short Sale or even a Loan Modification. I have helped many homeowners in the past initiate the paperwork through their financial institution to stop a foreclosure and start the short sale process and have had the pleasure of helping people keep their homes through the Loan Modification process.

What happens if I receive multiple offers on my property? 

The Seller in a short sale situation requires bank approval in order to proceed to escrow. It is in the Sellers best interest to accept an offer that is much higher and closer to the payoff amount, so as not to be considered for a promissory note. Thus, the Seller will want to submit all offers to the bank and allow the bank to choose which offer they would like to negotiate on. Much of the time, the mortgage companies will not entertain multiple offers and only want to see one ratified offer at a time. ratified meaning that the parties to the contract have accepted the terms of the contract. (For additional definitions of real estate terminology, visit the glossary index of my website). 

Many Buyers do not like this aspect and therefore are unsure of pursuing a short sale. It may take weeks to months before you find out that the bank has rejected your offer in favor of another offer. And there is no recourse for any monies invested.

Do I have to file for Bankruptcy?

A bankruptcy can be very damaging to both your credit and future applications for credit. Creditors will want to know if you have ever had a bankruptcy in your lifetime. In fact, many employers are leaning towards background investigations and will want to know if you have filed bankruptcy or experienced a foreclosure. It is your right to not provide such details, however, it may cost you a really great job.

By pursuing a Short Sale, you can possibly escape the need for filing bankruptcy. This will help your credit in the long run as well as your future employment.

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Are Short Sale guaranteed to be approved by the Mortgage Company?

The financial institution(s) may refuse to grant the Short Sale. Your credit may suffer greatly. Your financials will be under a microscope by the financial institution and you will be required to submit all your confidential financial information to your REALTOR® or Representative processing the Short Sale on your behalf. Keep in mind, that REALTORS® are very familiar with this process and respect your privacy immensely. Your file is handled with the utmost discretion at all times and is held under lock and key. REALTORS® have a fiduciary responsibility to look after your best interest at all times. Also, it is wise to work with an Agent or REALTOR® that understands the rules and regulations of the Multiple Listing Service. Sometimes advertising your home as a Short Sale can slow the progress as many buyers are unwilling to view Short Sales. However, it takes just one buyer to fall in love with the features of your home, short sale or not. The Real Estate Information Network states very clearly that once a short sale is approved it must be listed as such in the MLS. However, a Short Sale is only approved when the bank send the approval memorandum. It would be entirely up to the homeowner if they wish to advertise their home as a Short Sale prior to this memorandum being issued by the financial institution. This is a very important detail to consider when marketing a Short Sale, and one that is often overlooked.

For a confidential consultation, please contact Rebecca Keeney, your Hampton Roads REALTOR®, Berkshire Hathaway HomeServices Towne Realty.

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Do mortgage companies make repairs to Short Sale properties?

Banks typically will not make repairs. However, it is not impossible to negotiate this. There have been properties, on a case by case basis, that have had repairs made by the bank in order to proceed forward with the sale. This is also true of tax liens and other liens against the property. Banks will sometimes negotiate to pay a portion of the liens in order to liquidate the asset. This is another reason why it is so important to have a skilled agent working with you. Any damage to the property that will be required by the buyers lender to be repaired will have to be negotiated and either the homeowner, buyer or financial institutions will have to make the necessary repairs in order to move forward to a closing. 

Another factor to consider is that it may be a crime to remove certain appliances from the home.You may want to consider this before removing anything from the home. Understanding what appliances are considered personal property and which are not will greatly help you make this decision. 

Tax Consequences

There may be tax consequences. It is in your nest interest to seek the advice of a tax consultant or tax attorney. The financial institution may forgive the debt and will issue a 1099 for the amount of debt forgiven. This form is sent to the IRS to allow the bank to write off the loss. The IRS treats the forgiven debt as a taxable income which means you will need to pay taxes on the amount owed. Look for this notice as it may take more than a year for this to be processed.  

Consult a tax accountant or the IRS for details on legislature involved with a Short Sale.

It is strongly recommended to negotiate into the contract a provision that states that the sale is contingent on the financial institution not seeking repayment or a promissory note. However, with this in mind, do know that many financial institutions now mandate that this verbiage be removed from the contract before they will proceed with allowing the short sale. This clause may be helpful for the Seller, but may possibly harm a Buyer, so be sure you understand what this statement means before signing a contract. It should be explained to you and clarified in detail. Basically, a Seller can choose not to continue with the short sale and allow the home to go to foreclosure if the financial institution refuses to accept this clause. It may compromise the transaction and any monies invested by either party to the contract. For more information, please contact Rebecca Keeney, REALTOR® to arrange a confidential appointment to discuss your options.

A Short Sale is not always "SHORT"

A short sale is not usually short, although I have been able to get approval in under a week on more than a few occasions. It is generally a lengthy process and largely dependent on the submission of a thorough and complete package being sent to the financial institution(s) and in a timely manner. Ensuring that you communicate promptly with the bank, submit responses quickly and accurately are a must. Being detail oriented is a necessity.

Processing a Short Sale is a very serious transaction and requires a skill set of an experienced and truly dedicated REALTOR®. It is good to ask your REALTOR® how many Short Sales they have processed and how many years they have had processing short sales. However, keep in mind that some Agents are more advanced learners and although they have not conducted numerous short sales, they may have had the ability to learn in great detail valuable information that is required to process a successful transaction. 

Many Agents are unfamiliar with the portals and computerized databases and systems in place by 3rd party vendors contracted through financial institutions top process short sales. Financial institutions are inundated with thousands of short sale files and may not be able to efficiently process them all in a timely manner. Using a 3rd party vendor is common practice and the comprehension and ability to maneuver through these computerized systems is a must.

There are so many details involved - more than what the average homeowner is aware of. It would be my pleasure to meet with you to explore what possibilities best fit your needs. My goal is to help you through the Short Sale process and assist you in placement into a new home that meets your criteria. 

For a confidential consultation, please contact Rebecca Keeney, your Hampton Roads REALTOR®, Berkshire Hathaway HomeServices Towne Realty.

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For a confidential consultation, please contact Rebecca Keeney, your Hampton Roads REALTOR®, Berkshire Hathaway HomeServices Towne Realty.

The Do's and Dont's of Short Sales

10 Things a Buyer should know about Short Sales

10 Things a Seller should know when selling short.

 

View Active Short Sales in Virginia Beach, Chesapeake, Norfolk and Surrounding Areas Click here

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