What is a Short Sale?

What is a real estate Short Sale?
A.
A short sale is a sale of property in which the proceeds from the sale fall short of the balance owed on the loan or loans secured by the property sold. In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the property owner in exchange for the sale of the property to a third party. A short sale is typically executed to prevent a foreclosure.  Lender negotiations are critical and require the expertise, experience and strong working relationships with mortgage companies and banks that are provided by short sale agents such as Los Angeles Short Sale Assistance Center.

What are the advantages of a Short Sale?
A.
For you, the homeowner, advantages include avoidance of a foreclosure on your credit history. Having a foreclosure on your credit report is second only to bankruptcy and will substantially reduce your credit score. You may also have to wait several years to qualify for a mortgage again.
The impact of a short sale on your credit is much less severe than with a foreclosure. And, if buying a home is something you’d like to do in the future, if you successfully complete a short sale, in most cases, you may again qualify for a mortgage in as little as 18 months.

A short sale is typically faster and less expensive than a foreclosure and when you use the agents at Los Angeles Short Sale Assistance Center to facilitate your short sale, there is NO COST to you.

I’m late on my mortgage and may be facing foreclosure, what do I do?
A.
The first step is to contact us and speak with one of our agents. Los Angeles Short Sale Assistance Center can, and will, assist you in understanding all of your options to avoid foreclosure. You’re not alone. Many distressed homeowners don’t know what to do, give up, and do nothing. That’s the worst thing you can do! You have other options. WE can assist you in understanding your options and negotiate with your lender on your behalf.

Is there any cost to me to do a Short Sale?
A.

Absolutely not. All closing costs are offset by your lender.

How do I qualify for a Short Sale?
A.

As the borrower on the property, you must demonstrate true hardship.

 

What criteria demonstrate that I am in a “hardship” situation?

A.
A hardship situation is one that results from an extenuating circumstance that places you in the position where you can no longer afford your mortgage payments. Examples include:

•  Unemployment or the loss of a primary income source

•  Inability to work due to a health issue

•  Business failure

•  Bankruptcy

•  Death of your spouse or significant other

•  Moving and cannot keep up payments on two properties

 

If I do not live in the property, do I still meet the requirements for a short sale?

A.
Yes. Non-owner-occupied properties do qualify for a short sale.

Why shouldn’t I negotiate with my lender directly?
A.

For one thing, the property needs to be listed and sold to a third party. You need professional assistance to handle the sale. Plus, you only get one chance to negotiate a way out of foreclosure through a short sale process and it’s extremely important to have experience and expertise on your side to do it right. You wouldn’t go to court without an experienced attorney, why would you try to navigate this complex process of a short sale without an experienced short sale expert on your side?

Why would my lender agree to a Short Sale?
A.

Whether a lender chooses to foreclose or agrees to a short sale, the lender is taking a loss. In many instances, lenders take less of a loss with a short sale, and can cut its losses faster then what is required to foreclose. Foreclosure is usually a last resort for everybody. Remember, a lender is in the business of making loans, not owning and managing properties.

When should I begin the Short Sale process?
A.

Immediately! Distressed situations are likely to be very time sensitive and negotiations take time. The faster we can begin negotiating with your lender on your behalf, the greater the likelihood of a successful resolution. You don’t have to wait until you receive a notice of default or notice that foreclosure proceedings on your home are underway. Contact us today! We’re here to help you. Complete our Contact Us form or call us at 1-323-445-2674. We’ll answer all of your questions and you are under no further obligation.

Is a Foreclosure Sale and a Real Estate Owned Property (REO) Sale the same?
A.

NO. The sale of REO is not the same as a property up for a foreclosure auction. When buying a property during a foreclosure sale, you need to be ready with cash in hand to pay the loan balance plus any interest and other fees accumulated during the foreclosure process. In exchange, you will receive the property “as is” which might include existing liens and even current occupants that need to be evicted.
By contrast, a REO is a much “cleaner” and attractive transaction. The REO is owned by the bank because the bank did not find a buyer during the foreclosure auction. The bank will see to the removal of tax liens, evict occupants (if needed) and generally prepare for the issuance of a title insurance policy to the buyer at closing.

Is REO a bargain?
A.
It depends. While it’s true that the bank is typically anxious to sell the property quickly; the bank is also strongly motivated to get the highest price for it. When considering the value of REO property, look closely at comparable sales in the neighborhood and carefully calculate the time and cost of any needed repairs or remodeling to prepare the house for a move or resale. The bargains with money-making potential definitely exist, and many people do very well buying REO. Los Angeles Short Sale Assistance Center specializes in finding these deals for our clients.

Ready to make an offer?
A.
Typically the bank’s REO department will use a listing agent to get its REO properties listed on the local MLS. When we help you find a REO that interests you, before you make an offer on the property, we will contact either the listing agent or the REO department at the bank to find out as much information as possible about the condition of the property and how offers are received. We will also work with you in preparing an attractive offer which will include documentation of your ability to pay.
The bank may make a counter offer. In that instance, we will work with you to decide whether to accept their counter, or offer a counter to the counter offer. We will negotiate a fair and eqitable resolution for you and make the process as easy as possible.

Glossary Of Terms
Amortization
Repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years).
Bankruptcy
A legal alternative that allows the borrower to clear any debt obligations by restructuring the payment terms. A bankruptcy stops the foreclosure process until the bankruptcy process is completed or the court allows the lender to resume the foreclosure.
Default
Occurs when the borrower does not meet its legal obligations according to the loan terms.
Deed in Lieu
Voluntary conveyance of title in exchange for a discharge of debt. The house must be free of other liens and must have clear title. In simple terms, the borrower agrees to transfer title of the property to the lender, who accepts the property in exchange for the total debt.
DTI (Debt-to-income ratio)
A comparison of gross income to housing and non-housing expenses.
Fair market value
The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.
Foreclosure
A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.
Forbearance
Under a forbearance agreement, the lender agrees to stop the foreclosure process and determines payment terms that, at a certain time, will bring the borrower current.
Lien
A legal claim on a property by a lender or other entity (called the lien holder) against the property owner that owes the money.
LisPendens (LIS):
A publicly recorded notice of a pending lawsuit against a property owner that may affect the ownership of a property. This process is required in a few states to begin the foreclosure process if a borrower is in default.
Loan Modification
A transaction in which a lender agrees to modify any or some of the terms of the mortgage. This is a process where an existing note is modified, but not canceled. Changes may include: extending the term of the loan, changing the monthly payments, changing the interest rate, reduction of reduction of principal, etc .
Principal Balance Reduction
When a lender forgives a portion of your principal balance as part of a loan modification. The mortgage payment due for this note is based off the new loan amount. Only applicable in heavily depreciated areas.
Reinstatement
Occurs when the property owner pays off the amount in default to bring the loan payments current in order to stop the foreclosure process and return to the original terms of the loan.
REO (Real Estate Owned)
A class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction.

Short Sale
A property sale negotiated with a lender in which they agree to less than the total amount due.