Short Sale FAQs

Is a short sale better than foreclosure?

The best thing about short sale is that it doesn’t affect your credit score as drastically. Yes, there will be a dent in your credit score depending upon how late your payments were but it won’t have a permanent effect in some cases. After short sale, you may have the chance to buy a new home immediately but after foreclosure, you will have to wait for 5-7 years. A foreclosure will show as a FORECLOSURE on your bank statement but a short sale will show up as a SETTLED DEBT. You can find the detailed differences between foreclosure and short sale here

 Why would my lender help me? What benefits they would have?

It is a fact that short sale is better than foreclosure. Return on Investment (ROI) is more in short sale. The lender usually gets their savings money back 6 months earlier as compared to foreclosure. Also during foreclosure, lenders have to carry out the entire process and they need continuous support from attorneys, which is pretty expensive.

Is it necessary to hire a real estate agent? Who’ll pay them?

A homeowner isn’t obliged to hire a real estate agent but the lender might require you to list your home with an agent. They have the right to refuse to do short sale if you don’t have an agent. It is highly recommended to hire an agent who is a short sale expert. He/she can guide you about the entire process, which is quite complicated.

As far as fees are concerned, commissions are paid to real estate agents by bank. In few states, they might get a special fee which is different from commission.

What are the chances of getting a waiver from bank/lender?

If the homeowner got a loan from 1st position lien holders, the chances of waiver might increase substantially. 2nd lien position holders on the other hand, usually get a small portion of the funds after the short sale and they aren’t very keen of giving the waiver. They might ask the homeowner to contribute funds at the closing table otherwise; they might file a deficiency judgment against them.

There are different federal programs out there too such as HAFA, Coop Short sale and others. If you are a part of one of these programs, your agent will have to negotiate the terms and conditions of these programs with your lender.

How long the entire short sale procedure takes?

Depending upon your lender, state and financial situation, short sale process might take 3-12 months.

How can I speed up the short sale process?

Working with a short sale expert helps in speeding up the process. They will guide you at every step and help you to prepare your documents. If your documentation is in place, you can save a lot of time.

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