The year is 2006, and you’re inside Country Mutual Bank. Surrounding you are a newlywed couple, a family of five, and a hardworking professional who apparently was just promoted. They all have one thing in common, they are buying a house! They spent their time looking for the perfect place that they can call home, and they finally found one that is just right. All that’s left is to sign the docs and move in!
Fast forward to present day, and things are not looking so good for these people. The couple lost their jobs, the professional suffered a pay cut, and the family had an unexpected increase in their expenses. To top it off, the housing market has fallen out from underneath them, and the homes they bought for $500K are only worth $200K. Unfortunately, they are unable to sell their homes because they owe more to the bank than it is worth, but they can no longer afford to make the mortgage payment. They’ve even tried to obtain a loan modification, in an attempt to make good on their obligation, but were denied after months of getting nowhere.
What are they supposed to do? No one is willing to help! Even worse our dear homeowners are now a few months behind on their payments, and the bank has stapled a note on their doors with a date. I wish I could tell you that this was a love note, but alas it is a notice of trustee’s sale; and the date on it is a foreclosure auction date! It seems that unless a few miracles occur these homeowners will be forced out of their home, and onto the street!
WAIT! It’s not too late. There is an alternative to foreclosure, it’s not half bad. In fact it’s the smarter option, and one through which the bank will accept a discounted payoff of the debt owed on the property. This option is called a short sale, and it ultimately allows these homeowners to walk away from their properties in a better position than a foreclosure would. While both options may feel similar, they are vastly different. What they do not understand is that if their homes are foreclosed on, they will be in worse shape than if they had decided to short sell their homes.
Here are a few reasons why:
- They can buy a home again after 2 years with short sale compared to 7 years with foreclosure.
Although both options negatively impact their credit, short sales allow for a quicker rebound. It reduces their debt (more debt hurts your credit score), and within a couple of years their credit score will bounce back to normal and may even be better than before. Unfortunately foreclosure will delay their ability to buy another home again for up to seven years.
- Short Sales do not cost the homeowner anything.
All that is needed from the seller is to sign up. Everything else is left to the agent. They will negotiate with the lender, get the sale date postponed (if they know what they are doing), and will find a buyer for their home. In some cases, they may also be able to negotiate some money from the lender to help the homeowners with moving expenses.
- They do not have to make payments during the short sale process.
The short sale review process usually halts the foreclosure process allowing the homeowner to avoid making their payments. Instead they can save that money and use it towards finding another place to live, or even use it to lessen other financial pressures in their life.
- They may qualify for some type of cash or closing incentive.
These cash incentives range from $2,000 to as high as $35,000, and are being paid by lenders, the U.S. Treasury (HAFA), and FHA to short sellers. Homeowners can use the money they receive for moving and relocation costs (or to just get back on their financial feet).
- They are not contributing to the further depression of the housing market in their neighborhood.
Nothing hurts the housing market, and your neighbors, more than allowing your home to be foreclosed on. As a foreclosed, or REO, property it will sit on the open market suffering price reductions and often times vandalism until it finally sells for pennies on the dollar. By being responsible and short selling your property you are doing your part to help those around you who are hurting as well.
When looking at all the facts, choosing a short sale over foreclosure is a no brainer. However it is astonishing how few people truly understand what a short sale is, and how it can help them. It is, in my opinion, the only option for homeowners who cannot afford their homes and are underwater. Why face humiliation, destroy your credit, and prolong the time it will take before you can own another home? If the newlywed couple, the family of five, and the professional, all explored their options and went the short sale route they would find themselves back on their feet a lot sooner than if they let the bank have their way (foreclosure)!
If you can relate to this story, don’t wait! Contact a professional today who can help you figure out your best option. Every second counts!
Contributor, designer & admin for JohnHart Gazette.
When trying to decide whether a short sale is right for you, don’t be fooled into making the decision under false hopes that your credit will not be impacted all that much. For me the only biggest advantage in a short sale is just the shortened time frame in which you will be able to purchase a home in the future. Homeowners considering a short sale should seek a guidance of an experienced Short Sale Agent, it is imperative that you work with a specialist and someone with a track record an experienced Realtors or Agents like from The JohnHart Real Estate Agents, will be a great help to guide you on this program
It is important that before you buy a short sale you assemble a team of experts. During the initial phase you will need help identifying which homes are being offered as short sales. A real estate attorney who is knowledgeable in short sales is also key. Navigating the process of a short sale can be tricky so you will need an experienced short sale attorney to help