Life is full of challenges, and sometimes unexpected financial shifts can make it extremely difficult to meet all of our financial responsibilities. This can lead to the unfortunate situation of being unable to keep up with our monthly mortgage payments, causing us to fall behind and incur even more penalties.
A short sale, also known as short pay commences when a homeowner and their mortgage lender agree to a selling price lower than the outstanding mortgage debt, hence the term.
Short selling a property for less than mortgage owed to avoid foreclosure when facing financial challenges.
First Step to take
Step back and consider if you have explored these options:
- Is a loan modification not an option if it is not working out as you expected?
- Have you tried to sell but can’t because your home’s value is less than what you owe?
- Are you experiencing financial or emotional crisis?
- Do you want to leave your current dwelling in the best possible manner?
If these efforts fail and foreclosure becomes a possibility, and you want to avoid the stain of this record on your credit report for two to seven years. Due to added harm to current or future employment opportunities, the possibility of purchasing a car, acquiring appliances, renting a new place, and buying real estate in the near future.
The late payments have already been reported to the credit bureau; consequently, lowering the FICO score. and a NOD has arrived, because the lender(s) are not willing to work with you; may leave anyone at risk of foreclosure, and feeling cornered.
Once you have thoroughly explored all of your repayment options and attempted to restructure your mortgage balance with no success or seemingly impossible responsibility, and once you have acknowledged and accepted the reality of your situation – understanding that there is no viable financial solution – the subsequent step is to determine if you meet all the necessary qualifications for initiating preparations for a short sale.
Second Stage
Now is the time to to make one of these choices:
- Make a full payment for all the missed mortgage payments, including any arrears, late fees, and penalties.
- Settle the remaining mortgage balance with a balloon payment.
- Face the possibility of a foreclosure.
- Find out if you qualify for short pay.
The short sale option is only feasible once you have thoroughly explored all other options in the first stage, and then confirm that you fall in to the guidelines for a short sale process.
The short sale guideline
Third Step
Before beginning the listing process, it is imperative to thoroughly review and confirm adherence to all guidelines. To effectively market the property, it is vital to follow these necessary steps outlined in the guidelines. By doing so, any necessary modifications can be made to ensure a seamless and successful sale.
Additionally, it is very important to stay in communication with the default department of your mortgage company to negotiate a lower pay-off amount amidst financial difficulties, rather than facing the possibility of foreclosure.
The process can often be tedious and time-consuming, but it is crucial to be patient as there is no alternative to this.
Who Qualifies for a short sale?
Typically, the mortgage lenders will only accept a short sale if a homeowner meets all the guidelines and the following:
- Has fallen behind on your mortgage payments (exception may occur)
- Is able to proof hardship (Job loss, less working hours, illness of self or family member, Probate, divorce)
How To Start a Short Sale Process:
To prove your commitment and desire to sell the property while minimizing the lenders’ loss on the defaulted loan, it is essential to actively list the property for sale and make it readily available to potential buyers who may submit offers.
Once you’ve listed the property and received an offer, it’s crucial to compile the necessary supporting documentation for the lender’s short sale package to initiate the short pay process.
Following this, we will immediately provide comprehensive information about the listing and the offer, as well as the necessary supporting documents, to the lender to formally initiate the short sale process.
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