Posts Tagged ‘Bankruptcy’

Short Sale – Qualification Requirements and Tips For a Successful Transaction

Short sale is a term used by mortgage lenders who agree to accept a discounted payoff on mortgage loans. A short sale agreement is sometimes offered to homeowners who have defaulted on their mortgage and facing foreclosure. This type of real estate transaction allows the borrower to sell their home for less than is owed on their note and walk away from the property without causing extensive damage to their credit history.

Not all lenders accept short sale offers and those that do generally have their own set of procedures. Typically, this option is only offered after all other options to save the home have been exhausted. Additionally, the borrower must meet certain eligibility requirements to qualify for a short sale. These include:

1) The borrower must be able to show proof through comparable home sales that their home is currently worth less than the unpaid balance.

2) The mortgage is in default or near default. In the past, homeowners had to be in default by three or more months to qualify for a short sale. Today, some lenders are allowing homeowners this option if the borrower is in distress and heading toward foreclosure.

3) The homeowner must prove they are in financial distress. This is accomplished by submitting a short sale hardship letter which explains why the homeowner can no longer make their mortgage payments. Hardships include life-changing events such as extended unemployment, chronic or emergency health problems, bankruptcy, death and divorce.

4) The homeowner has no assets they can draw from to maintain mortgage payments.

There are two types of short sale agreements — ‘deficiency judgment’ and ‘payment in full without pursuit of any deficiency judgment’. The first requires the homeowner to pay the difference between the short sale and original amount. For instance, if the mortgage note balance is $150,000 and the short sale price is $125,000, the seller would be responsible for paying the remaining $25,000 to the lender.

If the seller is unable to promptly pay the difference, a judgment is issued for the amount due. This judgment is reported to credit bureaus and will remain on the homeowner’s credit report for 7 to 10 years; even once it is paid in full. Additionally, the deficiency amount may be subject to income tax.

Payment in full without pursuit of deficiency judgment, also known as Deed in Lieu of Foreclosure, allows the homeowner to return the house to the lender and be clear of debt on the home. Whenever possible, homeowners facing foreclosure should negotiate with their lender to obtain this type of short sale agreement.

Experts recommend working with a professional Realtor or private investor who specializes in short sale transactions. An experienced agent can help expedite the transaction and protect the seller’s interests.

Although short sales do not allow homeowners to retain ownership of their home, they are an excellent option that can help individuals retain their integrity and avoid the agonizing heartache of foreclosure.

By: Simon Volkov

About the Author:


Simon Volkov is a private Real Estate Note Investor who provides solutions to individuals facing foreclosure or short sale If you need to sell your house fast or looking for alternatives to help you avoid foreclosure visit www.SimonVolkov.com today.

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