What Is A Short Sale

What is a short sale

A Short Sale is when a lender accepts a discount on a mortgage to avoid a possible foreclosure, auction, or bankruptcy…

Yes, you read that correctly a lender may be willing to accept a lesser amount than owed. Huntley short sale agent specializes in renegotiating the loan amounts of your property with your lender allowing you to resell the house at a price suitable for all parties involved. At the end of the day you can walk away and live a foreclosure free life.

What is a short sale in Illinois like?

Short Sale AgentMost of the people who are facing foreclosure tend to be upside down on their property meaning that they owe more than the property is worth or cannot afford to sell their property and pay all costs associated with selling. This is where a short sale takes place. A homeowner is put in a situation where they cannot afford to sell their property and walk away without owing the lender money. Let Huntley short sale agent go over the entire process with you so you know just what to expect.

Many tend to think, why would a lender allow this? You can take the following points into consideration:

Illinois the foreclosure process is a lengthy it could sometimes take up to 9 months, which can also be delayed if you have the proper representation.

The foreclosure process costs the lender money. While the actual foreclosure process itself may not be very costly(3-5K), the amount of time that the lender does not receive payments, takes the property over, then tries to resell it later all amount to very high costs.

Lenders do not like excess inventory or foreclosures on their books, especially in this market. Don’t you think they have enough properties to sell?

Lenders can risk losing more money if the property goes to auction.

Lenders are not in the business of selling properties they are in the business of loaning money to people who buy properties.

Let’s face it foreclosures are a headache to a lender and most of the time it is worth it to just let the property go at a discount.

One point you should remember is that lenders are in the business of loaning money to people who buy properties, not in the business of taking them back and then reselling them. The last thing a lender wants to do is foreclose on your home.

WHY SHOULD A SHORT SALE BE AN OPTION FOR YOU?

The answer is simple, to avoid a FORECLOSURE. A foreclosure may be the most damaging thing that can appear on anyone’s credit report. As a matter of fact a foreclosure can stay on your credit report for just about 7 years to be exact. It is better to file for bankruptcy than to go into foreclosure from a credit standpoint. Think about it for a bit…

We live in a credit driven society so keeping a decent credit rating should be on everyone’s priority list. If you do have something damaging on your credit report it can affect everything you do from renting an apartment to buying a car. All creditors will look at your credit when you apply for anything and when a property, the largest asset that most of us ever obtain, is showing up turned back to the bank, they will think twice about lending you money.

SHORT SALE VS. BANKRUPTCY

When faced with foreclosure many people tend to turn to bankruptcy as an option of solving their problem. Now there is a large difference that many of the “professionals” fail to tell you. Filing for bankruptcy will consolidate your debt and can wipe out your liabilities, but it will not save you from having a FORECLOSURE put onto your credit report. Instead now you will have both a bankruptcy and a foreclosure on your credit. If you plan on eventually turning back your property you WILL STILL HAVE A FORECLOSURE ON YOUR CREDIT REPORT. Trying to conduct a short sale while in bankruptcy can hold up the process, but it is possible. My best advice is to consult with a knowledgeable bankruptcy attorney prior to making any decision, especially should you have additional debt that you are unable to control besides your property. One key point to keep in mind is that if your home is the only debt that is creating an uncontrollable situation for you then a short sale option is most likely your best bet vs. a bankruptcy. If you should need additional help with debt consolidation you should call a bankruptcy attorney.

WHAT CAN QUALIFY ME FOR A SHORT SALE?

Many people can qualify for a short sale but for most lenders they will want to see some type of financial hardship. One thing you must remember that while a short sale may bail you out of a foreclosure, the lender can lose lots of money so not all short sales will be accepted. If the process were that easy everybody would be doing it themselves. The reason why short sales are somewhat unheard of are because nobody knows about them or wants to take the time to conduct them. Here are a few situations that could make a property short sale qualified.

Borrowers unable to keep up with current mortgage payments

Divorce

Death

Relocation

Over valued properties

Predatory lending situations/mortgage fraud

Loss of job

Unable to sell your property due to market conditions

Loan amount is higher than you can currently sell your property

and many other reasons…

WHAT HAPPENS TO THE LOST MONEY?

What many people tend to ask next is what happens to all the money that is never paid back to the bank? The result of a lender taking less money than what they are owed is called a deficiency. There are several ways a lender can handle a deficiency amount.

Forgiveness- The majority of the time when a short sale occurs the deficiency amount is forgiven believe it or not.

Promissory Note- A lender can issue the borrower a promissory note which specifies that the borrower can pay back the amount owed over an extended period of time say 15-20 years in the form of monthly payments.

1099 Tax Form- The lender may choose to tax the borrower on the deficiency amount as a capital gains tax. They basically consider their loss as your gain, therefore making it taxable. In many circumstances the client involved in the short sale is in a financial hardship so may be able to claim insolvency. This can eliminate this obligation but you should consult with a good attorney or tax professional.

Cash Contribution- Sometimes the lender may just ask for cash at the time of closing ranging anywhere from $200-$5,000.

One point to remember is that these are remedies for the lender to cure their loss. Once you speak and consult with a professional there are also remedies you as a homeowner are given as well. Since each situation is different results will vary. The most important part is that none of these listed above are any worse than having a foreclosure on your credit.

FREQUENTLY ASKED QUESTIONS…

What if I have several mortgages on my property?

Most people in your situation do. Each lender is negotiated with that needs to be “shorted”. As in anything else the more lenders needed to short the more time consuming, but it depends on your current property value, offer price, and loan amounts on each loan.

How much time does it take?

From the day you accept a contract to the time that the property will close can take up to 90-120 days. There is much paperwork involved and negotiating which takes time.

What if I have already filed bankruptcy?

Just because you have already filed bankruptcy does not mean that you cannot do a short sale. Most “professionals” do not want to do a short sale because of the amount of work and time associated with it. As mentioned before the last thing you want is a foreclosure and bankruptcy on your credit. Bankruptcy may cure your debt and liabilities but it will not save your credit. Depending on if you file for a chapter 7 or 13 bankruptcy you can still do a short sale, there is just more paperwork involved and it will take a bit longer to complete.

What about property taxes I did not pay?

They get paid at closing from the lender since title has to be free and clear when transferred to a new buyer.

Are all short sales accepted?

If the lender believes they will net more money for your property through a short sale vs. taking the property back then they will most likely accept the offer. Many lenders are encouraging them vs. taking the property back. It is in the lenders best interest in all cases to accept a short sale vs. foreclose on the property.

GREAT, HOW MUCH DOES THIS COST?

It costs you nothing. When conducting a short sale, or any deal, you always must deliver free and clear title to the new purchaser of your property. While we are conducting a short sale with a lender all costs are taken into account and paid for by the lender. Part of the amount that you are shorting the lender includes all the closing costs typically associated with selling a home. These costs are viewed as a wash for any lender because if they took the property back they would have to pay them anyways since the property would have to be free and clear when resold. These include property taxes, title costs, attorney fees, back assessments, and even commissions, which is how we are paid.

Now once in a while you may be just shy of reaching the lenders requested net amount and you may have to go into your pocket to pay the difference but that is rare. If you use the right representation you can avoid that!

HOW DO I START A SHORT SALE?

Huntley short sale agent specializes in both marketing and positioning your property while simultaneously procuring a purchaser who will buy your home for a discounted price, of which we will renegotiate with your lender. Selling your house through a short sale requires more than three times the amount of work of a traditional sale. We feel safe saying that over 95% of realtors in the Chicagoland area either do not know what a short sale is or do not know how to conduct one. Putting together a detailed short sale package to submit through the lender itself is very time consuming. From the marketing aspects to finding a right buyer to having enough patience to see the deal through can be very challenging.

We have set out and put together a fully equipped team to handle every aspect of the short sale process. From a marketing coordinator, in house real estate attorney specializing in default situations, negotiator, and an administrator. We have a fully equipped team to make this stressful time very easy on you. We strongly recommend using proper representation with a specialist shall this be an option for you. All of our consultations are fully confidential, free, and we come to your property.

Call Huntley short sale agent direct at 847-287-8742 to ask any further questions you may have about the process or even set up a consultation. You can also e-mail us directly at huntleyshortsaleagent@gmail.com

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