Short Sale Information

In this section, I hope to answer some questions you may have regarding a 'short sale' or 'preforeclosure' and how the process affects you, your credit and your future.  If you have additional questions, please contact me.

    

Question: What is a short sale and how does it work?   

     A short sale is best defined as a transaction that occurs when a home is sold but the proceeds of the sale do not pay off the existing loan or loans that are against the property. Basically a short sale is when the homeowner owes more on his mortgage than the home is worth in today's market. In order to complete a short sale transaction, one or more lenders must accept a discounted payoff allowing escrow to close.

     Lenders are not obligated to accept discounted payoffs on property loans and short sales tend to offer some unique obstacles, so a successful short sale is almost always due to the expertise, skill and hard work of the Realtor handling the transaction. The process of a short sale is very similar to a normal real estate sale except terms of the contract must be agreed upon by the lender/mortgage holder, in addition to the owner of the house. Sellers are required to submit documents to the lender such as bank statements, current W-2s, tax returns and a hardship letter addressing why they can no longer be current on their house payments.

     If you are considering conducting a short sale on your property, it is advisable to get legal advice from a real estate attorney that is familiar with the short sale process in addition to contacting a tax advisor in relation to any tax ramifications. Real estate agents cannot advise you on whether your property qualifies for a short sale since they are not licensed lawyers or CPAs. However, they can advise you on what issues to be aware of and who to contact.  The process takes time and patience is required by all. In this current real estate market, lenders are overwhelmed with property negotiations and any given transaction could take weeks or months to complete.

 

Question: Is 'short sale' the same as a 'preforeclosure sale'?

     "A preforeclosure sale involves the sale of the property by the borrower to a third party for less than the amount owed to satisfy the delinquent mortgage, as agreed to by the lender, investor, and mortgage insurer." (Source: FNMA announcement 08-16, 06-25-08)  

     Although the terms 'preforeclosure sale' and 'short sale' have been used interchangeably, there is a significant difference for purposes of obtaining credit. For Fannie Mae purposes, a preforeclosure assumes that the borrower has been delinquent in paying his or her mortgage and the lender agrees to accept a lesser amount to avoid the time and expense of a foreclosure action. A short sale, however, can also refer to situations in which the lender of the mortgage agrees to a payoff of a lesser amount than is actually owed, even on a current mortgage, to facilitate the sale of the property to a third party. (Source: FNMA announcement 08-16, 8-13-08)

 

Question: How long is the time period after a 'preforeclosure sale' before a consumer can be eligible to obtain credit to purchase a property?

Two years from the completion date. No exceptions are permitted to the two-year period. (Source: FNMA announcement 08-16, 6-25-08)

 

Question: If a borrower sold his or her property as a short sale, but was never delinquent on that mortgage and is now attempting to purchase a new primary residence, will Fannie Mae purchase the loan?

The loan will be eligible for delivery to Fannie Mae provided that the borrower's previous mortgage history complies with Fannie Mae's excessive prior mortgage delinquency policy -- that is the borrower does not have one or more 60, 90, 120 or 150-day delinquencies reported within the 12 months prior to the credit report date -- and the borrower has not entered into any agreement with the short sale lender to repay any amounts associated with the short sale , including a deficiency judgment. (Source: FNMA announcement 08-16, 8-13-08)

Disclosures:  Elite Realty is not associated with the government, and our service in not approved by the government or your lender.  Even if you accept this offer and use our service, your lender may not agree to change your loan.

    


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Elite Realty Group
1447 Ford Street Suite 101 • Redlands, CA 92374
Mobile (909) 663-4567 • FAX 888-411-8251



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