In simple terms, a short sale is transaction in which the bank(s) accepts a discount on their mortgage to allow a sale, and thus avoid foreclosure or bankruptcy. For example: A homeowner, who is facing foreclosure, has an existing first mortgage of $500,000. The market value of the home is $350,000. The Mortgage Bank agrees to wipe out $150,000 in mortgage debt, and accepts the offer for $350,000 and the home is sold. In actual practice, a Short Sale is the most complex of all Residential transactions, so make sure you work with seasoned professionals.
During a Short Sale, our Law Firm partners negotiate with your mortgage Banker(s), on your behalf. Utilizing our expertise and vast experience, we are able to convince the Mortgage Bank(s) to reduce your loan balance on the home, in most all cases. This allows us to then sell your home quickly to another Buyer, versus allowing the Bank to Foreclose on the property which would ruin your credit, possibly leave unpaid debt, and cause undue embarrassment. You may ask yourself “Why should I care, for I have no more equity left in my house?”… Well, the fact is there are several important reasons why a Short Sale is far better for you compared to Foreclosure… Here’s why:
1.) Less Damaging to Credit Rating: A Foreclosure will severely damage ones credit rating for 7 years, but a Short Sale is less damaging and its effect does not last as long.
2.) Major Banks are Encouraging Short Sales over Foreclosure: Fannie Mae (FNMA) recently changed their underwriting policy so that a past home owner now has to wait 5 years after a Foreclosure before FNMA will underwrite a new loan. If the homeowner conducted a Short Sale the wait time is just 2 Years! Freddie Mac also offers participating Banks a $2,200 incentive to conduct a Short Sale versus Foreclosure.
3.) Probable Relief from HELOC 2nd Mortgage: When the 1st Mortgage Bank forecloses, the 2nd TD HELOC loan is not deleted from your debt. The 2nd TD HELOC Mortgage Bank may take legal means to collect their debt after the Foreclosure. With a Short Sale, we negotiate with both lenders to highly reduce or totally eliminate the HELOC loan debt.
4.) Dignified Solution: With a Short Sale, we sell your home just like your neighbors have done. It’s a dignified resolution to a tough situation. On the other hand, after a Foreclosure, a Sheriff performs a lock out, the grass turns brown, and a Bank Sales Rep places ‘Bank Foreclosure For Sale’ signs in front of the property for your neighbors to see.
5.) Much Shorter Delay to Renewed Loan Worthiness: We have established an association with a National Credit Restoration firm. This firm has been able to make major improvements to the credit ratings of our past short sale clients, within months. But they have extreme difficulty in making improvements to damaged on credit reports resulting from Foreclosure.
6.) “Cash for Cooperation”: Some of the banks we work with are now offering home owners a Cash incentive in order to Cooperate with a short sale, versus allowing the property to be Foreclosed on by the Bank. Which Banks and amount of Cash offered, is on a case by case basis.