Proof Of Income And Assets
If the seller has money in the bank, including retirement funds, it is unlikely that the lender will let the debt slide. The proof of income and assets must include income tax and bank statements going back at least two years. Sometimes sellers are unwilling to produce these documents because they conflict with information on the original loan application, which might not be completely accurate. If thats the case, the deal is unlikely to close.
S To Buying A House Through The Short Sale Process
A typical short sale involves a series of steps, generally in this order, according to Bobbi Dempsey, co-author of The Complete Idiots Guide to Buying Foreclosures.
Foreclosure And Short Sales
Foreclosure and Short Sales at Lowest Level Since 2007
Minneapolis, Minnesota Twin Cities home buyers were unflustered by slightly higher interest rates in August as pending sales were up 10.9 percent to 5,244. Along with rising prices, increased sales activity is fueling housing demand, while buyers continue to watch inventory levels for more options. New listings rose 16.5 percent to 6,951, marking the fifth consecutive year-over-year increase in seller activity. Buyers have 15,773 properties from which to choose 9.9 percent fewer than August 2012 but 21.2 percent more than in January 2013.
The overall median sales price was $208,000, up 16.9 percent compared to August 2012. A shift in sales type is driving this price growth. At this time last year, foreclosures and short sales together comprised 35.8 percent of all sales activity. In August 2013, these two distressed segments made up just 20.7 percent of all sales. On the seller side, the percentage of all new listings that were distressed in August fell to 17.8 percent, down from 32.7 percent in 2012.
Minnesota Closed Sales August 2013
Foreclosure activity and home prices are inversely related, said Andy Fazendin, President of the Minneapolis Area Association of REALTORS® . As distressed activity has subsided, prices have rallied. Sparse inventory has exacerbated this dynamic.
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It Can Protect Your Credit
From a lender’s perspective, it’s better to recover a portion of a mortgage loan than to absorb a total loss. Therefore, in lieu of a foreclosure, banks will often settle for a short sale. This allows both the lender and the homeowner to end up in a better position.
One concern for many homeowners, however, is whether the bank will sue for a deficiency judgment after foreclosure. In an attempt to recover the difference in the amount that was paid and the amount of the loan, the bank can file a lawsuit against the homeowner. A deficiency judgment will appear on a homeowner’s credit report and have a negative impact, just as a foreclosure would .
But rather than endure a costly and possibly lengthy litigation process, a bank will often cut its losses with homeowners who are unable to pay their mortgages due to a proven hardship, such as a divorce or loss of income. And the reduced amount of money owed will ease the burden on the homeowners and not irreparably damage their .
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What Are Short Sale Homes And Foreclosure Properties
Short sale properties are homes sold to a third party for less than the amount owed by the homeowner. Although unfortunate, short sales provide homeowners under some financial hardship with an alternative to foreclosure. However, the lender must agree to absorb the loss caused by a short sale, usually incentivized to avoid the costly foreclosure process. On the other hand, foreclosures are homes that are being forced to sell by the lender to recoup any potential losses.
How To Find Short Sales & Foreclosures Near You
The real estate industry is ripe with properties that are considered to be profitable for investors to rehab and flip. However, none may be more appealing than foreclosures and short sales. These are the properties investors must approach proactively. Doing so, unfortunately, is easier said than done. On average, short sales and foreclosures sell for approximately 30 percent less than a non-distressed property. Therefore, they are a priority for every investor, including your competition. Everyone in your market will be vying for these properties, as they offer some of the highest ROI .
You must approach distressed properties with a proactive plan. Unbeknownst to many, there are actually steps you can take to give yourself an advantage when locating and tracking down these homes. Establishing a working rapport with the appropriate people may actually land you the home of your dreams at the best possible price. Whether you are working with other investors or posting up on the courthouse steps, you can land a good deal before everyone else even knows it is available. The following illustrates 5 simple ways an investor can find foreclosures and short sales before everyone else:
Connect With Likeminded Investors
Visit Your Local Courthouse
How Long Does A Short Sale Take
A short sale can take as little as a few weeks or as long as several months. Because short sales are complicated transactions, they tend to be more time-consuming. Plus, the original lender needs to review the short sale offer to determine whether they will accept it. If the lender believes they can make more money by going through the foreclosure process, they might not accept the short sale proposal.
You can reduce the time it takes by working with a real estate agent that has experience with short sale transactions. A short sale is one real estate deal where you really need to get help from an experienced agent or attorney. Not all real estate agents know how to handle a short sale, so make sure you consult with one who can demonstrate special training and a good track record. Having a real estate agent on your side who knows how short sales work and who has negotiated others will increase the chances of closing the deal.
Short Sale Vs Foreclosure
A short sale is not the same as a foreclosure. In a foreclosure, the lender repossesses the property and then tries to sell it for enough to recover its costs. In a short sale, a lender accepts that it wont recover its outlay, and its considered the better option than dealing with the red tape involved with foreclosure and then going forward with handling a separate transaction.
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Home Value Estimator For Shorter Al
There are currently 69 real estate properties in shorter, AL,with a median automated valuation model price of $85,600.00. What is an AVM? It isa smart computer program that analyzes and predicts the approximate value of a home,property or land in shorter, AL, based on current market trends, comparable realestate sales nearby, historical data and, of course, property features, among othervariables. These automated home estimates are often very helpful, providing buyers andsellers with a better idea of a homes value ahead of the negotiation process. For example,the average home price in shorter, AL, is $95,093.00, with the most expensive housein shorter, AL, topping out at $391,000.00 and the cheapest home in shorter, AL,clocking in at $26,100.00. In other words, theres something for every potential homebuyeror savvy investor in shorter, AL!
Figure Out The Financing
This is critical. You have to know how youre going to pay for the property. If youre a good credit risk, the existing lender may be willing to give you a loan. Since they already have a lot of your information in the short sale paperwork, they may be able to expedite the loan application process.
Its important to understand that in a short sale you need the ability to move quickly. Once an agreement is worked out, it is common the lender will require closing in as few as 20 days. This is too late to start shopping for a mortgage.
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What Challenges Have Short Sales Presented For Realtors
The rapid increase in the number of short sales, and the short sales process itself present a number of challenges for REALTORS®. Major challenges include:
- Limited experience. Many REALTORS® are new to the short sales process a difficulty which is compounded by many lenders’ lack of sufficient and experienced staff to process short sales. Even if the REALTORS® are experienced, most servicers are under-staffed and still not adequately trained, making negotiating a short sale particularly difficult.
- Absence of a uniform process and application. Until HAFA guidelines were established, both short-sales documents and processes were lender-specific, making it very difficult and time-consuming for REALTORS® to become knowledgeable and efficient in facilitating these transactions.
- Multiple lenders. When more than one lender is involved, the negotiations are much more difficult. In the past, second lien holders held up the transaction to exert the largest possible payment, in exchange for releasing their lien, even though in foreclosure they will get nothing. This practice is less common today.
As a result of these challenges our members have reported difficulties with: unresponsive lenders lost documents that require multiple submissions, inaccurate or unrealistic home value assessments, and long processing delays, which cause buyers to walk away and harm distressed sellers.
It Can Offer The Seller Peace Of Mind
Real estate transactions generate a whirlwind of activity between the buyer and the seller, and they’re often stressful by nature. But they don’t compare to the pressure that a homeowner is under during a foreclosure. The major credit hit, the drawn-out legal process and the overall stigma attached to foreclosure can be quite unnerving .
Short sales are not exactly risk-free when it comes to the seller’s credit, and they won’t completely diminish the financial implications when homeowners are unable to pay for a home that they purchased. But a short sale will open the door to solutions for homeowners that can allow them to avoid legal action and the lengthy, laborious foreclosure process.
Short sales can leave homeowners in a much more positive position, lessen their financial burden and salvage their credit to a degree. A short sale can provide “light at the end of the tunnel” to homeowners and offer them a platform from which to start rebuilding financially .
For more great information on short sale and foreclosure, check out the links on the next page.
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It Gives Homeowners More Control
Once the ball starts to roll in a foreclosure, an arduous and stressful process begins for the homeowner. The mailbox starts to fill up with demand letters and confusing documents, and constant exchanges with the lender’s legal team ensue.
In a short sale, there are still negotiations, meetings and paperwork for the homeowner to weave through. But the process plays out more like a traditional sale, as opposed to a litigious and pressure-packed foreclosure proceeding.
Any real estate sale can be somewhat stressful, but a short sale will allow the homeowner to play more of an active role in the process and deal mainly with the bank, the homebuyer and the real estate agent. Overall, a short sale is much more manageable for the homeowner than being at the mercy of a bank’s attorneys during a foreclosure .
Should I Sell My Home Through A Short Sale
Whether you should proceed with a short sale depends on your individual situation and whats likely to work best for you in the long run. If you cant afford your mortgage, and if home values have dropped in your area, you might not have much of a choice. A short sale might be able to help you preserve your credit to some degree by helping you avoid a foreclosure on your record.
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What Is The Fundamental Issue
NAR continues to push the lending industry to improve the process for approving and expediting short sales. In a direct response to REALTOR® concerns, the Treasury Department developed the Home Affordable Foreclosure Avoidance Program , to establish uniform procedures, forms, and deadlines for short sales. The development of the HAFA program pushed both Fannie Mae and Freddie Mac, as well as a number of large servicers, to implement standardized processes and procedures to improve the speed and efficiency of short sale transactions.
It Can Benefit The Housing Market
Many homeowners have spent years building up equity in their homes, only to watch it vanish as a result of the housing crisis. The housing market has been saturated with underpriced homes due to foreclosures, and finding buyers for many of these properties can be very difficult.
The wave of foreclosures has been damaging to the economy on a number of levels. Property values drop in neighborhoods occupied by multiple foreclosed houses. Once vibrant areas must now manage blight as it creeps into neighborhoods filled with empty, bank-owned houses .
Short sales can help resuscitate a neighborhood by making it easier for buyers to get into homes at affordable prices. By giving buyers and sellers an option that avoids the nuances of a foreclosure sale, short sales can reduce the number of excess homes for sale in a neighborhood, in turn reducing the number of unkempt, vacant houses .
Like sellers who wish to get out of unaffordable homes, prospective homebuyers benefit by not having to endure the red tape and bank auctions associated with the purchase of a foreclosed home. And since a short sale may be able to recoup a higher percentage of a home’s value than a foreclosure auction could, short sales can keep overall home prices from falling to abnormally low levels .
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Foreclosure Vs Short Sale
When a borrower consistently fails to make mortgage payments, the property is foreclosed upon. In a foreclosure, the lender assumes ownership of the property and evicts the borrower. Foreclosed properties may be sold at an auction or via traditional real estate agents. For borrowers, a foreclosure badly damages their credit score.
A short sale is often used as an alternative to foreclosure because it mitigates additional fees and costs for both the creditor and borrower. The negative impact on the borrower’s credit score is typically smaller in a short sale than in a foreclosure, but a short sale usually involves a lot more paperwork for all parties.
Complications For Buyers In Foreclosures Vs Short Sales
Foreclosures and short sales offer deep discounts for buyers. Someone buying a house in a short sale can expect the home to cost 10% less than an ordinary home on the market foreclosures are even cheaper,often by about 30%. However, these purchases are not without complications.
The most common problem with foreclosed properties is that they are often sold as-is, so the house may need repairs, which are sometimes very expensive. When a foreclosed property is purchased in an auction, the buyer must pay cash on the same day, which means they cannot get the property inspected, and therefore have no idea about the extent of repairs needed. Sometimes, the buyer of a foreclosed property may be required to pay unpaid property taxes from the previous owner. Finally, redemption laws allow borrowers to reclaim their foreclosed homes, even if the home was sold to a new buyer after foreclosure. This can cause many complications for buyers of foreclosed properties.
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Financing Options For Foreclosed Homes
Private lenders tend to be skittish about financing foreclosure deals. However, several government-sponsored financing options are available for those who qualify:
- 203 loans from the Federal Housing Administration ,
- Fannie Maes HomePath ReadyBuyer program,
- The HomeSteps program through Freddie Mac.
Foreclosure Short Sale Reo: Whats The Difference
Are you interested in buying a foreclosed home? If youre up for the potential risks, delays, and hidden costs, your first step is to understand the four types of distressed properties youll see in the listings: pre-foreclosures, short sales, foreclosures up for auction, and REOs. Exactly what are you looking at?
When most people think of foreclosures, they think of homes being sold at public auction. Not to mention the sad stories behind them, of owners who fell on hard times. But a foreclosure auction happens at a certain point in whats usually a long process you can buy before or after that too.
Lets look at the four types of distressed properties, where they fit into the typical foreclosure process , and some of the pros and cons of trying to buy each type. Whatever type you might have your eye on, its even more important than usual to work with an experienced real estate agent.
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