By now, we’ve reached a consensus that a short sale is the best alternative to a foreclosure and that lenders/servicers are giving more approvals than ever before as it is deemed to be, in most cases, the better financial decision for them as well. Short sale approvals are now issued frequently. However, I have been receiving multiple inquiries regarding post short sale deficiency situations. Their stories are similar in that they all are having unexpected negative consequences after short selling their home. Just because you’re granted an approval letter and are able to close the short sale, does not mean you are necessarily off the hook!
Will there be a rebound in the housing market for 2012? Many are becoming more optimistic about this year’s housing situation as homes have reached unprecedented lows in interest rates and prices thus increasing demand. Concurrently, rent prices are rising and more people are apt to buy which will decrease the excess of supply in our market (many of which are short sales and REO properties) and ultimately, bring the prices back up. What does this mean for current homeowner’s who are struggling with their mortgage(s) and considering a short sale?
Seeking guidance for your financial decisions may be one of your best decisions yet. Many individuals are hardworking citizens yet they constantly find themselves in a financial rut. This may not necessarily be a result of the individual’s hard work ethic but the individual is unaware that the system typically works against them if they lack proper guidance. You can work hard, take two to three jobs, and still find yourself in financial debt. However, if you have someone who is guiding your energy toward financial freedom, then your hard work will actually get you to where you want to be.
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If you pursue a short sale or any other route of letting go of your home, you will inevitably have a ding on your credit score. Although the amount varies depending on which route you take or whether you are late on your mortgage payments in a short sale, having a ding on your credit score will make it difficult for you to utilize your credit especially when purchasing another home. What are mortgage companies looking for in your credit? How quickly can you purchase another home after a short sale? We will review these questions and a solution.
You’ve finally made it through one of the biggest hurdles of your life. You are probably renting or staying with a friend or a relative. You have a ding on your credit score from the short sale and you may be worrying about tax implications from short selling your home. What should you do from here?
Once the seller and all other parties agree to the terms on the approval letter, the lender typically gives 30-45 days to close. This is a deadline, not a suggestion although in some cases, you may be able to request extensions. If it is a HAFA file, the approvals are usually around 60 days and the banks state that there are no extensions (yet to be verified as we have always closed within the deadline).
A short sale approval letter is issued by the lender approving the terms of agreement in order to close the short sale transaction. This letter supersedes language written on any other documents. If you have two lienholders, a 1st and a 2nd Mortgage/HELOC, then you will receive two separate approval letters. If the letter is agreeable to the seller, it would be the final agreement between all parties and the short sale transaction may initiate its closing process. Be very vigilant for the verbiage used on the approval letter regarding deficiency.
After all the information for the short sale is given to the servicer (short sale package with offer, Brokers price opinion, and all other information) this is when the file is reviewed by the investor. In this period, your negotiator utilizes his/her skills to acquire desirable terms on the approval letter.
As stated in my previous post on the importance of appraisals in short sales, it is pivotal for your property to receive an accurate appraisal for your home. Lenders have rejected short sale offers due to inaccurate short sale appraisals because they believe they deserve more for the property than offered.
Lenders are all about the numbers. They know that late payments and foreclosures would be detrimental for them financially so upon providing proof via financial documents that you are in fact struggling or will be struggling with your mortgage payments, they will consider an approval for the sale. However, servicers are extremely particular about complete short sale packages (i.e. updated documents, missing documents or signatures) and many short sale files have closed due to insufficient effort and organization in this area.
