One phrase that has become part of the American vocabulary is “short sale” – but what exactly is a short sale and how does it work?
“What is a short sale? Homeowners are ’short’ when they owe an amount on their property that is higher than the current market value. A short sale occurs when a negotiation is entered into with the homeowners mortgage company to accept less than the full balance of the loan at closing. A buyer closes on the property and the property is ’sold short.’
Why can’t I just let my home go into foreclosure? You could, but there are many negative connotations for going into foreclosure.
- If you have a Fannie Mae loan, they may seek a judgment against you to get the loan paid off.
- You will also be ineligible for another government-backed loan for 5 years.
- Your credit score will be negatively impacted for more than 3 years by as much as over 300 points.
- A foreclosure will remain on your credit history for 10 years.
- A foreclosure is the most challenging issue against a security clearance outside of a conviction or a serious misdemeanor or felony.
Do I need to write a hardship letter? Yes, it is required by every lender. Be specific about your hardship. Tell them about major events in your life that would affect your ability to stay current such as a job loss or an illness or death.
How do you, my listing agent, get paid? Who pays your commission? The bank will pay the commission along with all the other usual closing costs.
I want to do a short sale and I have a 2nd mortgage, can I still do it? Yes, both of your lenders will need to be satisfied in some way to complete the short sale. If your first lender will be paid off by the sale, then you just negotiate the terms with the second lender. Many short sales do involve 1st and 2nd mortgages.”