"Short" Sale Information.

[TBW]

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[TBW]

Please correct me if I'm wrong but I thought lenders will give you another home loan sooner if you have a short-sale rather than a foreclosure. This could be a possible advantage to those people who are looking to buy a home sooner rather than later.

This assumes a short-sale POST bankruptcy on a home IIB and not reaffirmed.

[HHM]

Please correct me if I'm wrong but I thought lenders will give you another home loan sooner if you have a short-sale rather than a foreclosure. This could be a possible advantage to those people who are looking to buy a home sooner rather than later.

This assumes a short-sale POST bankruptcy on a home IIB and not reaffirmed.

Not the case; presently lenders treat foreclosure, deed in lieu, and short sales the same way. There has been some loosening of standards but that really only relates to a 'hardship" exception.

[StartingOver08]

HHM is right about there being no difference between the three as far as the lenders loosening standards. However, the difference between the three (short sale, Deed in Lieu and foreclosure) really only amount to when the clock starts ticking on your "recovery" period.

Right now the guidelines for FHA are 3 yrs from the date of transfer of the property to the new owner (bank/or other owner). These guidelines change regularly, so check with your lender. Both a short sale and a Deed in Lieu take less time to complete than the current foreclosures. This is directly dependent upon where you are located. If you are in one of the hard hit areas (California, Nevada, Arizona, Michican or Florida) the timeline for a foreclosue has been extended. The banks simply do not want to transfer the property into their name.

In our area (S FL) it averages 2 yrs for a foreclosure. So the "recovery" for getting a new mortgage doesn't even start until the title transfers to the bank/new owner. This means the three yr clock could actually be 5 plus yrs!

BTW, the surrender date on your BK has nothing to do with the timeframe. That's why some people prefer the DIL or short sale - to speed up the transfer of the deed.

[TBW]

HMM - Thank you for your response. I thought that a foreclosure was 3 years after transfer of property but a short-sale was 2 years after closing. I'm not sure FHA really has an official policy on short-sales.

Startingover - You articulated my point better than I did. At least with a short-sale you have more control on when the "clock" starts ticking and you can be approved for a new loan. While with a foreclosure you obviously can stay in the home rent free for an extended period of time, but some people might find more of an advantage to getting in a new home quicker and providing some stability especially if they have families.

[BrokeOR]

I'm in the middle of a short sale (Wells Fargo). While your information on short sales was decent, I might add some things.

1. Get a licensed realtor who has short sale experience in your area to list and negotiate for you. MUCH better than the overworked angels at HUD, this is a person who will make money only if he/she closes the deal.

The number one and two reasons that the banks turn down short sale attempts- incomplete packages submitted and the lack of "arms length" in the transaction- completely evaporate when you have a competent professional to guide you through this. Additionally, if (like I did) you find a realtor who has worked short sales with your specific bank, you'll get faster attention from your bank. Finally, the work to get it all closed is handled all by the realtor, not you. During a time when you don't need additional stress and an whole new learning curve, a realtor is a great asset.

2. You are right when you say that there is really nothing in a short sale for the seller, financially speaking. But for some, there is an enormous psychological difference between a foreclosure and a short sale. I feel better knowing that I will leave good new owners in the house and will not leave a bank owned, uncared for property during the "selling season" in which several of my recently laid off neighbors must work to sell their houses.

In my case, my home is in a very sought after neighborhood and was very easy to sell, even though we have a ton of short sale and foreclosed properties in our small town. We listed it at market value (still a woeful 35% less than what we paid and almost 50% less than the top of our market), showed it for 2 weeks and got three offers in one day-a bidding war that eventually ended up with an offer well over asking price. We attracted a savvy investor who is going to have his son and new daughter in law live in it and buy it from him. They have been educated about short sales and are "in it for the long haul".

3. Lenders are MOTIVATED,and thus the "long haul" with approval from banks is itself evaporating. They are freaked out a bit, by the inventory of failing loans and failed loan modificaiton plans and want to move houses. Many of the big banks are training realtors in the short sale process in markets with the largest foreclosure rates. And they are NOT looking forward to the possibility of having a number of customers come at them with a proposal to reduce principal on their loans. In short, the lenders are MOTIVATED. This has borne out in our case: Within two weeks of submitting, we were "in the system" and had the bank's appraiser out, something that used to take months.

Short sales aren't for everybody. But they aren't necessarily the horrendous redtape affairs they used to be, given the banks' new attitudes and if you turn the process over to a professional.

[HHM]

HMM - Thank you for your response. I thought that a foreclosure was 3 years after transfer of property but a short-sale was 2 years after closing. I'm not sure FHA really has an official policy on short-sales.

Startingover - You articulated my point better than I did. At least with a short-sale you have more control on when the "clock" starts ticking and you can be approved for a new loan. While with a foreclosure you obviously can stay in the home rent free for an extended period of time, but some people might find more of an advantage to getting in a new home quicker and providing some stability especially if they have families.

It is 3 years from both. The ONLY reason to do a short sale is on the off chance of getting the property out of your name sooner than a foreclosure. Also, a little known secret about short sales, you need to show some sort of hardship to get approved, the mere fact that you are upside down in the home values will not guarantee you a short sale.

[TBW]

It is 3 years from both. The ONLY reason to do a short sale is on the off chance of getting the property out of your name sooner than a foreclosure. Also, a little known secret about short sales, you need to show some sort of hardship to get approved, the mere fact that you are upside down in the home values will not guarantee you a short sale.

I would assume that a Chapter 7 bankruptcy would indicate a hardship.

[BrokeOR]

TBW:

Those in Chapter 7 typically do have the sort of hardship that will get a bank to agree to a short sale.

Having gone through the process, I can tell you that it's no "secret" that you must prove hardship once you decide to pursue this route. A perfunctory research check on the Internet tells you that, as will your lender. In fact, a hardship letter is the very first document that you must provide to your lender to determine if you "qualify" for a short sale. It isn't hard to write, it need only be one page: Here's what happened, here's where we stand, here's what we ask. This is only one piece of documentation, but if you are going through the bankruptcy process, the other pieces are very similar to some of what you must provide to a court in 7 or 13, including copies of bank statements, paystubs, current budget etc.

BTW: A good realtor with SS experience will also use "hardship" as a base qualifier. Obviously, if they know you won't present a qualifying package to your lender, they'll steer you away from a SS.

Disclaimer: I am not a realtor nor in any way attached to a real estate organization. I "bang" on the importance of a realtor in the SS process only from experience. Not only did our realtor take over all negotiations with the bank on our sale, he is widely recognized in the local real estate community as one who can get these sorts of transactions done in a timely manner. I had several realtors tell me that they steer their clients clear of shorts sales because of the hassle EXCEPT when they know my realtor is the listing agent-again, because he's known as somebody who knows how to navigate the lenders' system successfully.

[Loan Litigator]

Great subject...

This is one of the most honest explanations I have seen on short sales. I would add, if you did a stated loan, doing a short sale or loan modification has an added risk, fraud. Most stated loans do not have an accurate statement on the income. This was done by the consumer or by the mortgage broker who arranged the loan. Either way, doing a short sale or loan modification requires you give the correct information to the lender which may provide them the information necessary to prove fraud or negligence. Check your original loan application to ensure it is accurate. If not, be quiet, dont do a short sale or loan modification.

[jmanford]

Also, a little known secret about short sales, you need to show some sort of hardship to get approved, the mere fact that you are upside down in the home values will not guarantee you a short sale.

Does proof of having filed for chapter 7 bankruptcy qualify as a hardship by itself? Or do I have to explain in more detail to the lender?

[jmanford]

If not, be quiet, dont do a short sale or loan modification.

Not understanding.. What do you mean?

[HHM]

Does proof of having filed for chapter 7 bankruptcy qualify as a hardship by itself? Or do I have to explain in more detail to the lender?

Nope, chapter 7, by it self, will not count as a hardship.

[flower04]

This has been a great thread! Thanks to all who have posted!

[lorrieduke]

HHM... above in the first post you said "a foreclosure that is done within the context of the BK is viewed as a "single" negative". I'm not sure I understand what you're saying... We filed chapter 7 bankruptcy a year ago, June 2009 and it was discharged September 2009. In the bankruptcy was surrendered the house but are still living in it and just received the Notice to sell (taped to my front door) today stating the sell date will be June 23rd. What are you saying exactly? Are you saying the forclosure has already been reported to the credit agencies when the bankruptcy was reported??