Short Sale Process:
Common elements of the short sale process.
- List the home
- Bank authorization forms signed
- Send bank authorization to the bank(s)
- Market the home
- Follow up with bank(s)
- Fill out financial form(s)
- Gather proof of financial information
- Send BPO, financial form and financial information to bank(s)
- Find a buyer
- Negotiate purchase price/terms with buyer
- Prepare net sheet for bank(s)
- Send purchase contract, listing agreement, net sheet to bank(s)
- Insure that the buyer is pursuing a mortgage.
- Negotiate any/all issues with the buyers contract, including inspection issues.
- Follow up with bank and gather other bank requested information
- Send bank requested information back to bank(s)
- Finalize short sale with the bank(s)
- Order payoff letter from bank(s)
- Get adjusted payoff letter from bank(s) for title company.
- Close the property
- Check that the bank(s) recorded the payoff.
- Make sure that the client knows if he/she is required to pay tax on the loss (Most
homeowners are NOT required to pay tax.)
No matter which Realtor you hire, make sure that he/she has agreements with an attorney and a title company, and guarantees that you will receive NO bill from either of them - NO MATTER WHAT.
What is a Short Sale?
In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.
A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, the advantages include avoidance of having a foreclosure on their credit history. Additionally, a short sale is typically faster and less expensive than a foreclosure.
Short Sale -v- Foreclosure:
Foreclosure:*
The foreclosure in Illinois is a Judicial Foreclosure. This means that the foreclosure must be approved by a Judge. This means that if a person's home is foreclosed on, that they will actually have a judgment against them on their credit report.
A foreclosure will remain on a credit report in the public records section for 10 years. The other issue with the foreclosure is that on loan application (for purchasing a new home), under Declarations, Section VIII it specifically asks a borrower if they have had a property foreclosed upon in the last 7 years.
The other issue with a foreclosure in Illinois is the Deficiency Judgment. The lender has the right to ask the court for a money judgment against the previous home owner personally.
The last problem is bankruptcy. The bottom line is that if previous home owner had the money to pay for the home, they would have.
In the end:
The home owner will most likely have 3 judgments (including bankruptcy) and get docked at least 300 points on his or her credit report.
Short Sale:*
The short sale is very different. The nicest part of a short sale, is that it is NOT a judgment. It is an agreed apon arangement between you and the mortgage holder. The other nice feature is that banks do not generally ask for any of the losses back from you the previous home owner.
In the end:
If the home owner does go through a Short Sale and the bank does not request a money judgment, the homeowner's credit will be affected by as little as 100 points.
Other good news:
Fannie Mae now only requires 24 months' seasoning for a new loan.
The information contained on this page is for information purposes only. Your situation may be very different and we encourage you to seek the counsel of an attorney or other professional to determine your specific rights, obligations, and any other possible possitive or negative situations that may affect you.