If you are a seller considering a short sale of your home in the St George Utah area then you have come to the right place.
Short sales can be laborious and specific. As such, I as your REALTOR®, may have be able to help you identify some options. If you are like me and like to get going down the road, sometimes I just want to talk to somebody rather than sit and read on the internet all day long. If this is you, call me now at (435) 674-3600.
Please be aware that any given REALTOR® or brokerage or agents mechanisms for dealing with Short Sales may change, to include any of the information below being not as accurate as it once used to be. I try to update information, but the below information was written to help during a more difficult day where distressed properties used to represent about half our listings. Things have drastically changed since then, so please take the below information as informative and not deemed as fully accurate. Thank you!
Timing and Advantages to a Short Sale over Foreclosure
I see two categories that exist. First are the people that are getting ready to start the process of a short sale. Typically, this is about when they call me. The other category can possibly see one coming on the horizon and either plan ahead or don't. Some want to possibly pursue their options AHEAD OF TIME. This is WISE. These people are calling me with increasing frequency, just to check out their options and consult. The government often offers free consultation as well.
For the second, more conservative group we have those that want to wait until the last minute to "go down with my sinking ship". They are admirably not wanting to pass the problem onto others. However, regretably one could perhaps save themselves from taking on too much water before the inevitable happens anyway. Let me try to speak to your situation if I can righ now. I try to over here at Short Sale - The Right Thing to Do.
When and if you did get into doing a short sale, often it is a matter to consider the timing of any missed payments. This is on top of trying to get an offer in the door to submit with your hardship letter and package to the bank(s)/infestor. So, often you will want to get the home listed sooner vs. later. Part of the reason is that an offer is often required for presenting your hardship situation letter to the bank in the first place. My theory is that just because it is a distressed situation, does not mean you cannot take a little control over how you exit the situation and a Short Sale provides better security many times, than does a foreclosure. It is thought that one can recover and get back into a home faster having done a short sale. However, there is not guarantees and I disclose this up front and that the internet will detail better information on the subject than I have from overhearing such. That it impacts your credit less than a foreclosure, I've heard can also be a lie. I leave it for you to check into for yourself. I personally believe what I've been told by too many others, that it is better for the reasons I've pre-supposed.
Plus, I think the sooner you help the bank get the property off their books, the sooner their ledger is more preferably full of performing assets rather than non-performing ones. It can equate to a liability and opportunity cost for them, the longer it drags out.
Also, I do not think you need necessarily any missed payments to start the short sale. Andy, my short sale specialist, says it depends on the bank. You need not always to have missed payments! Be careful of anyone that advises you to miss payments. Warning, this can permanently mar your credit.
Most banks require an offer on the home prior to you even being able to submit the hardship situation letter and paper work. This is why it is necessary, to start talking to my short sale specialist to see about missed payments, etc. He is qualified to advise on this process. I mostly handle the actual selling process. Listing and marketing your home is relatively easy to get started, that is what I do. You can call me, Brian now at (435) 674-3600.
Advantages of Doing A Short Sale
There are three possible advantages to doing a short sale over a foreclosure.
- Take a less endurable hit to your credit or ability to lend again in the future. It is generally a consensus that it is better than a foreclosure on your credit and ability to purchase in the future and in less years time. Warning, there is not guarantee. Plus, remember on your credit report it has your short sale debt listed either as Satisfied, rather than it showing as Foreclosure (Unsatisfied).
- With a short sale, in the state of Utah, the bank(s) cannot come back after you for the difference owed them, that they were shorted on. See it reported here- Utah Senate Bill 42.
- You can have some control of your exit strategy because during the time the short sale is being processed, you can predict the timing better now, as to completion, and in the mean time, most of you have quit making your payments and can look towards a future. You get to control the exit a bit more with the wait that is involved to prepare for that time that is coming.
Beginning the Short Sale Process
Basic elements go into the beginnings of a short sale process. Some of these basic elements are as follows:
- Genuine hardship situation will be a given. So, first off is getting you home listed with me, your REALTOR®, and getting the first offer in the door. This helps to kick start the process of the bank recognizing the beginnings of a Short Sale with them. It used to be, that what started the process, was the ‘hardship letter’ and short sale paper work from the seller. Now, they pretty much all require an offer first, along with that paper work. So, get the ball rolling with your REALTOR® and allow for reasonable price setting on that home with utilized expertise I can provide. Price setting used to be important to you as a Seller, now you don't care as much. But you want to get this right for later on. That is one reason why you need a good REALTOR®, not just any REALTOR®. I've been trained like an appraiser in market evaluations.
- Next is to get with Andy and be filling out all the short sale package paper work he requires. You'll have needed to consult with him regarding which banks will have required missed payments as requisite or not, and when to present your entire hardship situation to the bank. You can prepare for that proactively without being hand held as an offer comes now almost immediately into the door. Andy will need all your paper work in, in order to submit the offer.
- Now you play the waiting game and intermittently know that Andy, our short sale specialist, will most likely be requiring things, like an appointment into your home with the banks appraiser or it could be another REALTOR® that is to help assess value for the bank. Also, he will be asking you for additional case specific situation, typically more documentation of your situation or technical paper work that makes it all copesthetic for them. This will be more runs to your fax machine or scanner, so plan on that.
- Lastly, you wait some more for the final approval and some more paper work they will at last minute want us to sign.
Please be aware that most often your Realtor commissions are included as part of the deficiency held in the sale of the home. In other words, you typically pay no commissions when it sells. However, the bank occasionally will ask a seller based off their financials for some money. If the person does not have any, typically I still see the short sale approved. Remember, we have an excellent conversion rate, but this does not constitute a guarantee. Our typical short sale approval is taking about 3 to 4 months to accomplish, after which there is another month for the buyer to come through on a loan.
Now, there are those REALTOR® agents that take on short sales, but they do not have a team or specialist, just running and doing short sales all day long. For this reason, they are less effective, bottom line. This is why you may want to use us. Having a specialist really does make it easier and much more confident feeling the whole way through. Thus, you can get sleep easier, knowing that Brian is on the case.
Dynamics Influencing a St George Short Sale to Take Place
Basically, a bank can lose less money on the sale of a home most often when they can avoid the cost of doing a foreclosure through a legal entity in the state or county in which the home resides. This can also be true even when a second lien holder or mortgage or bank is involved. The alternative for that second or third lien holder in not signing the offer/contract for approval for the sale to take place, is that they suffer the chances of getting nothing at the auction when it forecloses. Be aware, that just because we intitiate a short sale, does not mean it will short sale. The banks can and do, do what they want. But they do instigate a foreclosure process that runs in the background that often takes way to long for you to worry about, that gives you the time you need to "Short Sale" it first, short of the foreclosure, that they themselves typically approve. If other banks or lien holders are on it, it can make it go longer and even trip it up, as they often negotiate to 'get more' money 'out of' the first lien holder that all the money is coming to first. Basically, with a second lien holder, going rate is 3K, but some ask for and require 5K. If they do, that can completely kill it, forcing it to go to foreclosure and get auctioned off.
A foreclosure divides proceeds money to the lien holders by position. Often times the second lien holders get nothing if the sale did not yield enough money left over to also pay them off. The second or third lien holders will be flexible in signing any papers approving a short sale when bribed with a little money. Their approval by all of them is required in a short sale. They will still suffer a loss, as is our definition in doing a short sale, that the proceeds are less than what you owe. However, it stands to be potentially less or nothing, than if they decided not to approve and it went to foreclosure.
It is risky (although an educated risk) to assume that any of the lien holder banks will agree and approve a short sale, although most end up folding and agreeing to it. In other words, you never know.
You should be able to know or find out fairly quickly if you hold more than one mortgage on your property.
All these factors that can potentially stall a short sale, lead me as your REALTOR®, into using a a professional who specializes in getting it done, as all they do. It involves a lot of phone calling, even if there is only one bank to deal with, that I do not have time for. I get an offer in the door and sell your home, my expertise, and let my short sale specialist work in his area of expertise. This quite frankly is how you are better served. And if I as your REALTOR® am paying them out of my commissions, that the bank pays for in the sale, then you as the seller are just being better served all around.
Summary Dynamics of a Short Sale
To go over this again, things influencing a short sale might be:
- Home owner does not want the more negative aspects on their credit involved in doing a foreclosure.
- If it is most commonly thought that Banks/Investors that back the loan(s) stand to lose more money by funding an actual auction and foreclosure process, than they do by accepting a short sale.
- Separate short sale negotiations have to be initiated with each lien holder in which a deficiency will be perceived. You would think the separate entities would get together on things, but most often it is the REALTOR® or assistant that his having to pursue approvals by and between and for these parties. Why would they possibly not accept 3K if the alternative is getting nothing? Look at is this way, that is sometimes pocket change for them compared to the huge losses they incur. This complicates and sometimes necessitates the REALTOR® or specialist to go back to the first party to try to get and extra $2,000 out of them to make the deal work. If the extra $2,000 is not obtained or receded, it could derail the whole deal leading to a foreclosure, even after all the work by agents and Seller and Buyers that have put offers on that home. As such, having two or more lien holders on the home or two loan/mortgages can complicate the process. Most times it does not, enough to kill the deal, but sometimes it does. At very least, they take longer to get done. Can you see a REALTOR® doing all this phone work when real estate deals are to be had, the real money? This is why you need to use me, because the enticements are toward what I do best and my specialist in dealing with those tougher cases. I get less commission for itk, but it is worth it. At the end there is LITTLE money in it for your REALTOR®. Remember this when you think service was to be part of the deal... UNLESS it is already their specialty.
- Remember there is not gaurantees, some banks choose foreclosure. Most assume that the foreclosure is the more expensive route for the banks, but perhaps a bank will change its mind and see it as a better way to get a price closer to the appraisal that has come in on the home. During short sale approval process, the appraisal can come in higher than the offer. This necessitates the bank trying to get them to come up. When this happens most often they come to an arrangement, if the seller was already a solid offer, high enough to now bridge a narrower gap with the appraisal. It takes skill in setting price and getting a good offer in the door. Otherwise, after all that waiting, it is already possibly for the buyer to walk, in which case up front, upon initial marketing is when most of the back up offer(s) were secured. Without a backup offer to slip into place of the first offer that walks, you have to start all the process over at the beginning. This is why it takes so much time and skil up front by BOTH specialists!
- Remember, most short sales go through, but there is some that slip into foreclosure- there is no guarantee on anything at all. If that happens, the REALTOR® gets paid nothing for all their time and effort.
I wanted to discuss a couple options besides just allowing a foreclosure process to take its course. Short Sale is only one option that we all know about now. Another option that is not as much talked about is what is called Deed in Lieu of Foreclosure. Please be aware of this other viable option that still equates as a foreclosure, but it might limit the time of stress involved. You can consult with Wikipedia definition of Deed in Lieu of Foreclosure for definition and possibilities for you.
St George Utah Foreclosure Process and Procedure
For our Utah Foreclosure Process and Procedure in our local area consult that subtitle at our St George Distressed Properties 101.
How Short Sale or Foreclosure Impacts Credit Scores
While it is virtually impossible to tell just exactly how much given individual credit scores are affected there can be a threshold of guidelines in consequence that are the more extreme possibility listed at these more known websites. I would hope therefore that they would be a little more authoritative as to general guidelines on how your credit score could be effected.
Short Sales and Foreclosure Effects on Credit About.com
How Foreclosure Impacts Your Credit Score CNN Money Magazine
The HAFA Program (may or may not currently exist)
A new development initiated by the Federal government is leading to a minority of sellers, to qualify, after initiated work to meet guidelines, for a deficiency waiver through the participating primary lien holder bank/investor. That program is called HAFA. About 30-40% of the short sales that are conducted through my specialist, qualify for this program, which can be a very good thing. Some incentives and requirements are thus as quoted off of http://hafa-program.com/:
"Participation in HAFA cannot save the homeowner from losing his or her property, but it can eliminate the effects of a foreclosure on the homeowner’s credit. Financial incentives for participation in the program include a $1,000 servicing bonus for lenders and a $1,500 relocation bonus for displaced homeowners. HAFA is designed for homeowners who have applied to HAMP for assistance but have had no success with their loan modification program. To participate in HAFA, homeowners must still meet HAMP’s eligibility criteria (principal residence, first-lien mortgage, serious delinquency, unpaid balance under $729,750, and a mortgage payment over 31 percent of gross income). Homeowners must be considered for HAFA within 30 days if they cannot meet HAMP’s requirements or if they specifically request consideration for HAFA. However, the homeowner only has 14 days to respond to a written notice that HAFA may be available to them, giving the lender time to meet their 30-day deadline."
Some of this may need updating, please consult with the internet to cooberate things on this program. Better yet call me and ask for Andy, my short sale specialist phone number and you can get it straight from him who does it all day long.
These are some of the dynamics sellers need to examine when going the short sale route. I examine many other dynamics of a short sale as I discuss them with the buyers side of things. As a seller I would read up on all these things if you'd like in some additional links below.
If ever a Short Sale becomes "The Right Thing to Do" for you, will you please think about using Brian. I utilize some other help, Andy, and pay for him, to run our short sale through, for us, at my expense, at the cut from my own commission. So we both don't have to staff all those phone calls. Andy does all that. I play a vital role coordinating the offers and pricing securing, etc. is all key as well. Contact me, Brian at: (435) 674-3600 or go here to email me: Contact Brian.
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