Is a short sale right for me?
Where do I start?
A short sale occurs when a home seller owes more on their mortgage than the home is worth in the current market. The sale needs to be approved by the seller’s lender as they will be accepting an amount that is “short” of the total loan balance.
The decision to allow a short sale or not is entirely up to the lender, however, recent guidelines from HAFA (the Home Affordable Foreclosure Alternatives program) that took effect April 5, 2010 may help some homeowners facing a short sale.
This program provides lenders and sellers incentives for completing the sale (including a $3000 moving allowance for the seller.) However, we are now learning that this program does not include FHA loans (FHA has its own guidelines to help,) or loans affiliated with Fannie Mae or Freddie Mac at the moment. More lenders are getting on board with the HAFA program as it continues.
Due to economic conditions, the number of short sales across the country has risen dramatically. Since a short sale generally costs the lender less than a foreclosure, it can be a way for the lender to reduce it’s losses.
First – DO NOT move out of your home! With VERY few exceptions, you must be living in your home to qualify under the HAFA program.
Second – DO NOT pay money to a business up front to “help” you with a short sale or to avoid foreclosure. Due to cases of fraud and abuse, the state of Maine has stepped in and now requires Loss Mitigation companies to be licensed by the state. There should not be up front fees involved for the seller of a property. Most loss mitigation fees are actually paid at closing table by the buyer of the property and are negotiated in to the contract at the time a purchase and sale agreement is negotiated.
To qualify for a short sale, a seller must show some sort of “hardship” indicating why they are unable to pay the balance. This can include job loss, increased expenses due to an illness or death, increased expenses due to an adjustable rate mortgage, or an unforeseen loss of equity due to economic conditions. Short sales are not easy, but an experienced and competent realtor should be familiar with the process, have the necessary forms, and have the tenacity to consistently follow up with the lender to facilitate the process.
Sellers facing a short sale need to be committed to completing the process and willing to provide the paperwork and documents that will invariably be requested by their lender. While sometimes frustrating, a short sale is one tool available to sellers that can be used successfully to get out of a sticky situation and move on with their own economic recovery.
If you need or want to sell your home and believe you may be in a short sale situation, please feel free to call me at 207-240-2250. I would be happy to discuss your situation and see if we can work together to get your home sold and allow you to move on.