Sheila Calistri -- Mobile: (813)841-2000
People's Choice Office
8902 N. Dale Mabry #101
Tampa, FL 33614
Receive FREE access to all foreclosures, short sales, bank owned property, and Bank REOs.
Behind on mortgage payments? Facing foreclosure?
We can help. Contact us and understand your options to prevent foreclosure. Our team has the resources and the knowledge to help.
What is a short sale?
A real estate short sale occurs when a lender is willing to accept a loss on the
amount of the original loan in order to prevent the foreclosure
process from taking place. In this instance, the selling property owner would
remain the home owner instead of the bank, or lending party.
However, in a real estate short sale situation, the bank has an opportunity to
either approve or disapprove the proposed offer. A bank will often
allow a property short sale to avoid the foreclosure process from occurring,
as it is both expensive and time consuming. A real estate short sale is
favorable to the home owner because it does not have a negative
impact on their credit history. For more info, check out Wikipedia's definition of a short sale.
What is a foreclosure?
A foreclosure happens when an owner defaults on their mortgage
payment, and the lender or lien holder (often the bank) initiates
the sale of the property, against the wishes of the owner, so that
the unpaid mortgage on the property can be paid off by the proceeds
of the sale. For more info, check out Wikipedia's definition of a foreclosure.
Which one is right for me???
A real estate short sale is the lesser of two evils. Inevitably, if
the homeowner cannot afford to remain in premises, the lender will
repossess the residence through a foreclosure proceedings. A short
sale can save the homeowner more than months of stress, aggravation,
embarrassment, and uncertainty but can also limit the damage done to
the person's credit as compared to the foreclosure. Short
sales typically affect a homeowner's credit lasting only for around
18 months while foreclosures are far worse and can prevent
purchasing another home for many years to come.
| Issue | Foreclosure | Short-Sale |
|---|---|---|
| Future Fannie Mae Loan - Primary Residence | A homeowner who loses a home to a foreclosure is ineligible for a Fannie Mae backed mortgage for 5 years | A homeowner who successfully negotiates and closes a shower sale will be eligible for a Fannie Mae backed mortgage after only 2 years |
| Future Fannie Mae Loan - Non-Primary | An investor who allows a property to go to foreclosure is ineligible for a Fannie Mae backed investment mortgage for 7 years | An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage for only 2 years |
| Future Loan with any mortgage company | On any future 1003 application, a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 that asks "Have you had a property foreclosed upon or given titled or deed in lieu thereof in the last 7 years"?. This will affect future rates | There is no similar declaration or question regarding a short sale. |
| Credit Score | Score may be lowered anywhere from 250 to over 300 points. Typically will affect score for over 3 years | Only late payments on mortgage will show and after sale mortgage will be reports as paid or negotiated. This will lower the score as little as 50 points if all other payments are being made. A short sale's affect can be as brief as 12 to 18 months. |
| Credit History | Foreclosure will remain as a public record on a person's credit history for 10 years or more | Short sale is not reported on a credit history. There is not specific reporting item for a 'short sale'. The loan is typically reported 'paid in full, settled'. |
| Security Clearances | Foreclosure is the most challenging issues against a security clearance outside of a conviction of a serious misdemeanor or felony. If a client has a foreclosure and is a police officer, in the military, in the CIA, Security, or any other position that requires a security clearance in almost all cases clearance will be revoked and position will be terminated. | A short sale on its own does not challenge most security clearances. |
| Current Employment | Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure in many cases is ground for immediate reassignment or termination | A short sale is not reported on a credit report and is therefore not a challenge to employment. |
| Future Employment | Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment. | A short sale is not reported on a credit report and is therefore not a challenge to employment. |
| Deficiency Judgment | In 100% of foreclosures (Except in stats where there is no deficiency) the bank has the right to pursue a deficiency judgment. | In some successful short sales it is possible to convince the lender to give up the right to pursue a deficiency judgment against the homeowner. |
| Deficiency Amount | In a foreclosure the home will have to go through an REO process if it does not sell at auction. In most cases this will result in a lower sales price and a longer time to sale in declining market. This will result in a higher possible deficiency judgment. | In a properly managed short sale the home is sold at a price that should be close the market value and in almost all cases will be better than an REO sale resulting in a lower deficiency. |
If you are considering a short sale, there could be drawbacks.
- The Note may not be considered paid in full and may remain fully
in force. A lender who accepts a short sale may legally pursue the
homeowner for the difference between the amount owed and the amount
paid. This amount is known as a deficiency.
- Be aware the IRS will consider debt forgiveness as income.
Therefore the lender can file a 1099-C ("Cancellation of Debt Form")
which may subject the homeowner to tax liability.
- The lender may reserve the right to report this transaction to the
appropriate credit bureaus which may negatively affect the
homeowner's credit.
What you can expect from a short sale?
Although all lenders have different requirements and a broad array
of documentation, the following steps will give you a pretty good
idea of what to expect from a short sale:
Hardship Letter: This statement of fact describes how you got into
this financial bind and makes a plea to the lender to accept less
than full payment.
Proof of Income and Assets: Lenders will want to know if you have
savings accounts, money market accounts, stocks or bonds, negotiable
instruments, cash or other real estate or anything of tangible
value.
Copies of Bank Statements: If your bank statements reflect
unaccountable deposits, large cash withdrawals or an unusual number
of checks, it's probably a good idea to explain each of those line
items to the lender. In addition, the lender might want you to
account for each and every deposit so it can determine whether
deposits will continue.
Comparative Market Analysis: Sometimes markets decline and property
values fall. If this is part of the reason that you cannot sell your
home for enough to pay off the lender, this fact should be
substantiated for the lender through a
comparative market analysis (CMA). We can prepare a CMA for you
which will show prices of comparable homes in the area.
Purchase & Listing Agreement: When you reach an agreement to sell
with a prospective purchaser, the lender will want a copy of the
offer, along with a copy of the listing.
How can we provide foreclosure help?
We have experience in selling "short-sale homes/properties." Being
part of People's Choice Realty Services gives us the education and know-how
to assist you with this process. If you are considering a
short sale or should you have any questions, please contact us at
813-841-2000. Early communications with your lender increase
the likelihood of a successful negotiation.
Receive FREE access to all foreclosures, short sales, bank owned property, and Bank REOs. More information here.
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