Short sales have become more popular in the last several years, largely because banks want to avoid the expensive foreclosure process. The short sale process is sometimes a long and frustrating one, but the end result can be very rewarding. Once the property is sold, you will no longer have the debt hanging over you and the sale will allow you to start over again with a clean slate. Still, it is important that you prepare for the process so you know what to expect. Below are the top 10 things you should know before starting the short sale process.
1. A Short Sale Is Not a Foreclosure
If you are preparing for a short sale or considering it as an alternative when you cannot afford your mortgage, you may confuse it with a foreclosure. Short sales and foreclosures are not the same things. In fact, a short sale is a very good way to avoid foreclosure. A short sale will affect your credit score, but not in the same way a foreclosure would. It also will not remain on your credit record for as long as a foreclosure would. Lastly, you can also apply for another mortgage in two years after the short sale is complete. With foreclosures in Florida, you typically cannot take out another mortgage for seven to 10 years.
2. Closing Time Is a Long Time
It is not uncommon for short sales to take a long time to close–sometimes four to nine months. In some cases, it may take even longer. The lender will not simply tell you how much they will accept in a short sale. You will have to negotiate the price with the buyer and then get the lender to approve that amount. The approval process itself can take a long time but if the bank refuses the first offer, the process will take much longer.
3. You Must Qualify
Not all homeowners can go through a short sale when they are trying to avoid foreclosure. You have to qualify with your lender first, which means you must:
- Be underwater in your mortgage, meaning there is more left on the mortgage than what the home is worth;
- Prove financial hardship, such as divorce, unemployment, or significant medical bills;
- Explain why you can no longer afford your mortgage payment, such as if your ARM has been changed to a high rate you cannot afford; and
- Not qualify for a loan modification.
4. Multiple Lenders May Be Involved
You may be most concerned with the main lender that holds your mortgage, but remember there may be others, as well. If you have a home equity loan, line of credit or any other liens on the home, the lenders that hold those loans must also approve the short sale.
5. Work with an Agent
No one should ever sell their home on their own, but this is particularly true when you are going through a short sale. When going through a short sale, you will have to deal with a lot of paperwork, enter into negotiations with buyers and the bank, and more. Banks are processing more short sales now than they have in years past and they are more likely to work with you if your paperwork is complete and organized. This is important because if too much time passes, the bank can still foreclose on the property. Always work with a real estate agent during a short sale, and always make sure they have experience with short sales.
6. Frustration Is a Factor
Again, short sales can take a long time. Only about 25 percent of short sales actually close and this is largely because negotiations between you, the buyer, and the bank can quickly go awry. It is not uncommon for buyers to become frustrated and walk away from the process, which will cause additional frustration for you. You cannot always keep this frustration at bay, but you can prepare for it.
7. You Cannot File for Bankruptcy
If you are preparing for a short sale, you likely have other financial troubles as well, including significant debt. For many people in this situation, bankruptcy seems like a good option. It is important to know that even though bankruptcy can help with your debt, it will prevent you from selling your home in a short sale. After you file bankruptcy, creditors can no longer try to collect the debt from you. Technically, a short sale allows the bank to collect on the debt, which violates the rules of bankruptcy in Florida.
8. Lenders Have the Advantage
Lenders do take a loss on short sale properties, but it is still better for them than a foreclosure. The foreclosure process is very expensive for lenders, too–they will have to evict you, maintain the home, and pay taxes, such as property taxes until they can sell the home. A short sale allows the lender to avoid all of that, so do not be afraid to broach the subject with them.
9. Make Whatever Repairs You Can
If you are preparing for a short sale, it is likely because you have fallen into hard times financially. You should still make whatever affordable repairs are necessary to the home, though. Many short sales are sold “as-is,” which means the buyer cannot ask you to make repairs. Still, the better condition your home is in, the faster it will sell and the sooner you will be finished with the process.
10. A Deficiency Judgment Is Always a Possibility
The lender will not recover the full debt during a short sale, so they may try to secure a deficiency judgment against you. If they are successful, you will still owe the remaining portion of the debt once the home is sold in the short sale. It is important to work with an attorney who can help you avoid this and negotiate with the lender to get them to waive that right.
Our Foreclosure Defense Lawyers in Florida Can Help
If you are facing foreclosure and want to avoid it with a short sale, our foreclosure defense lawyers in Fort Lauderdale can help you through the process. At Loan Lawyers, we will negotiate with the lender on your behalf, protect you from deficiency judgments, and give you the best chance of a favorable outcome. Call us today at (954) 523-4357 or fill out our online form to schedule a free consultation.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact our experienced attorneys for a free consultation to see how we may be able to help you.