Prudential Ursula M. Stephan REALTORS
400 Boston Post Rd.
Sudbury, MA 01776 1-800-974-1776 info@prudentialstephan.com
Facing Foreclosure? Interested in short sale/ bank owned proeprties? There Are Options... We Can Help!
Our "in house" staff of Real Estate Brokers, Short Sale Experts and Attorney Referral Network can guide you in the alternative paths that may help you to avoid foreclosure.
A homeowner is 'short' when the amount owed on his/her property when combined with the closing costs and commission is higher than current market value. In other words the amount you can sell your house for is less than the combined amount of your mortgage balance plus commissions from the sale and closing costs.
A short sale occurs when a negotiation is entered into with the homeowner's mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then 'sold short' of the total value of the mortgage.
Qualifications:
For homeowners to qualify for a short sale, they must fall into all of the following circumstances:
Financial Hardship - There is a situation causing you to have trouble affording your mortgage. What is an acceptable hardship? Examples may be:
Loss of Job - The loss of a job will often result in a total loss of income making it difficult or even impossible to pay your mortgage.
Business Failure - If you are self employed and your business shuts down, this will often result in a total loss of income making it difficult or even impossible to pay your mortgage.
Damage to Property - If the property you live in was damaged due to a natural disaster such as a flood or if there was a fire and the cost to repair your home was too much of a financial burden, you could easily get behind on your mortgage payments.
Death of a Spouse or Family Member - The loss of your spouse or other family member can be a financial burden with expenses that are incurred. The resultant loss may also mean a decrease in family income making it difficult or impossible to pay the mortgage.
Severe Illness - An illness may result in you not being able to work which could result in a decrease in pay.
Inheritance - Not often, but sometimes an inheritance can result in a financial burden. If the estate was in debt and you inherited that debt, you could be left with bills you can't afford.
Divorce or Separation - When a spouse moves out and your income is cut in half or greatly reduced it may result in your ability to make your mortgage payments.
Mandatory Job Relocation - A mandatory relocation will result in you be forced to sell your home. If your home value has decreased, this may result in not being able to pay back what is owed on the property.
Medical Bills - Medical bills can be a financial burden with expenses that are incurred. The resultant loss may also mean a decrease in family income making it difficult or impossible to pay the mortgage.
Military Service - If you are in the Reserves and are called to active duty, you may have a decrease in pay from your regular job making it difficult or impossible to pay the mortgage.
Payment Increase or Mortgage Adjustment - If you have an Adjustable Rate Mortgage (ARM) that has come due the monthly payment could be too high for you to afford. If you are unable to refinance then a hardship may result from the rate increase.
Insurance or Tax Increase - If a new tax assessment or insurance rate increase has occurred, you may have an increase in bills that you cannot afford resulting in a hardship.
Reduced Income - Similar to a job loss, a change of job which decreases your salary, or a decrease in salary at your current job may affect your ability to pay your mortgage resulting in a hardship.
Too Much Debt - If your Debt to Income (DTI) ratio has increased and you are unable to pay your mortgage, you may have a hardship.
Incarceration - Being arrested and incarcerated may result in a decrease in income making it difficult or even impossible to pay your mortgage.
Monthly Income Shortfall - In other words: "You have more month than money." A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
Insolvency - The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.
What isn't a short sale?
A short sale is a way to avoid foreclosure. It is not a way to get out of your mortgage. In order to have a short sale approved you need to be in or headed towards foreclosure. That means that the seller has to have a valid financial hardship for why they can't pay their mortgage.
A seller without financial hardship that is upside down on their mortgage and wants to sell is not a potential short sale. This individual will have to wait out the market or bring cash to the closing table. If you are current on your mortgage and are capable of continuing to pay your monthly payments a bank will not approve a short sale because the hardship is not present.
Why A Lender Might Accept A Short Sale?
While most lenders will not be thrilled at the prospect of a short sale they are acutely aware that a foreclosure is usually a far more time consuming and costly option. In a real estate market where housing values are going down it is in the best interests of the lender to liquidate their problem loans as quickly as possible.
With a short sale a property can be sold and the loan taken off their books fairly quickly. If they pursue a foreclosure they run the risk of the process taking a substantial amount of time during which the value of the property is depreciating. Also, buyers will tend to write low ball offers when they know that a bank or lending institution owns the property. The property will also be left vacant which can result in vandalism and deterioration. Some owners will even gut the house just before the foreclosure sale as a way to 'get back' at the lender. This is illegal but nonetheless happens on occasion. So, you can see why a lender might want to go the short sale route and get the loan off of their books with minimal hassle.
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