If you are in the process of doing a short sale or think you have to do one. There are just a few things that you have to do. Now I know that for many people this is a tough decision and even here in the Santa Maria real estate market we are still doing short sales. But for some its one of the best decisions that you can make. The reality is that sometimes you just have to look at things from a business point of view as an investor and take the emotional component out of. The sooner you can look at things from a different perspective the easier it will be to move ahead and not only start over. But you may even find yourself in a better position.
There are just a few things to remember that you have to do when you are doing a short sale. Just follow the steps below.
1) Do not move out if you move out while in the process and before your lender approves your short sale. Many times they will deny you any kind of financial assistance to relocate. Since you moved out you no longer need the assistance. This can actually be thousands of dollars and can vary from loan to loan as well from lender to lender. So there is not a set amount or standard amount. The largest dollar amount our office was able to get for a client was close to $20,000.00. But on the flip side when your agent does get the approval you need to seriously make arrangements to be out in time, before the transaction closes. You can forfeit those funds if not and kill the short sale transaction. But just for the record typically a person receives $3,000.00 to $5,000.00. But then some there are times the bank will no pay anything so keep that in mind as well.
Remember you have not been paying anything for months during the time the short sale has been in the approval process. So when the time does come you should have plenty of money saved up. Just because your not make mortgage payments does not mean you have extra money to spend. You should be saving like your life depended on it. Because in a way it does if you plan on starting over and money does make that a bit easier to do.
2) Income documentation you need to be organized your lender and agent will be asking for this repeatedly. To the point of frustration. Pay stubs and bank statements. Your lender wants to see if based off of your paystubs if it is possible for you to afford those payments lets say if you were to get a home loan. As well as bank statements just how much money do you have in the bank. They will ask for these items in the beginning and near the end and several times during the whole process. But if you prepared and organize you can easily just give it to them without any delays.
3) Most importantly is patience. The short sale process is frustrating for everyone especially your agent. He does not get paid till the transaction closes. He will be make calls upon calls and resending the information over and over again. If you take into account the number of months it takes to close a transaction, hourly income starts to look less and less. So patience is needed because the process does take months we currently at the time of writing this have one transaction that we have had for over a year now. Still sending up dated paystubs and bank statements to the lender only hoping for an approval soon.
4) One last thing you agent is paid by your lender. You should not have to pay your agent anything to do the short sale for you. If your agent is asking for funds upfront or some kind of processing fee this is where you need to cut your ties and look for another agent, pronto.
Reality is that if you are dealing with real estate transactions you are going to be faced with having to deal with short sales. The majority of the homes on the market are still distressed properties whether they are foreclosures or short sales. Personally I cannot wait for the day when short sales are part of the history books and or when they do come back into fashion I am pretty much retired. Anyone that has dealt with enough short sales, knows that they can be a little challenging. Trying to get the bank to approve the short sale is never fun, but what is even less fun is trying to get a transaction on a home that has two loans and getting the second in agree is even less fun.
Another reality is that if the home owner is doing a short sale on his home for what ever financial reason that he can no longer keep the home, there is little to know equity or value in the home. The home is upside down on value and more than likely if they are two loans on the property the loan in second position more than likely will get little to nothing on what is owed to them. Typically the way it works is that you must get approval from the first before you can even attempt the approval from the first since the first in is in first position. Not only will you get approval from the first loan, before moving on to the second loan the first loan will also dictate how much the second can receive. Since the first is also more than likely not going to receive the full balance of what is owed on their loan.
Now I know that there is a lot of advertising and publicity about how banks are now more responsive to homeowners. There is even some legislation or proposed legislation to get the banks to become more responsive to the short sales we have. There is even material out there explaining how a short sale transaction is even more beneficial for the banks to do than a foreclosure. Now if that is the case one has to wonder why do some banks push for foreclosure or prefer that the homeowner go into foreclosure versus granting the short sale approval.
I have been dealing with a short sale transaction on 2021 Mariah Dr. , in Santa Maria, Ca. with Chase bank now for months. Now the first has agreed on to the transaction. Now I am the third agent working on this the first two pretty much gave up since Chase would not allow the short sale to take place. Each and every time it has been Chase bank that as stopped this short sale from happening. To the point where the representative has even advised the client your best option is to file Bankruptcy. Now Chase bank is in second position and knows very well how the short sale process works this is not their first short sale transaction as I am sure not their last. Now Provident bank that is in first position has been more than cooperative in getting this done. Chase bank that received tax payer funds has done nothing but stalled and stopped this short sale from happening. Chase bank one of the largest banks in the country has been reacting as if they have never been involved in a short sale transaction where they have been in second position.
Typically $6,000.00 is what the lein holder in first position typically allows the second to receive. Chase bank has even agreed to settle on a specific dollar amount only to later increase that dollar amount stating that the previous dollar settlement was no longer valid. Only to make the transaction even more impossible. According to the representative of Chase Bank since the real estate agents are making more money than they in the transaction they are. So they felt the need to increase the dollar amount to close the transaction to $24,000.00. It is unbelievable that this is the stance of one of the largest banks in the country to halt everything because the real estate agents are making more than they are. As well as offering or insinuating to the homeowners that they are better off to file bankruptcy. Why a bank that has already charged off this account and has basically considered this a loss and yet will not even let the client out of the lien. Is something that should be asked, whether there is an ulterior motive for the clients to just let this home go to foreclosure or is this the bank’s way of showing it is acting in a vindictive manner towards its former clients. As well as holding their financial situation hostage and forcing them to let the home go to foreclosure and file for possible bankruptcy since the loan on the home is a non-purchase money loan.
The problem with short sales is that they are anything but short. But it would be nice if all the banks were truly as responsive as all the marketing materials they seem to promote. As well as all the rhetoric that the govt. seems to promote as well to getting the banks to become more responsive in handling these transactions. So the sooner all these distressed properties can be flushed out maybe the sooner we can actually be on to a road of recovery.
There is alot happening within the realm of real estate every where not just in the Santa Maria real estate market and that holds true with just about all the mortgage home loans having to go bad, and unless you have been existing under a rock then you ought be some what familiar with the expression short sale which has come to be as familiar as the word foreclosure. Quite a bit of of you that live in either a house or condo regardless of whether or not you own it or not, you have had reminders left on your building, that there are a whole lot of people eager to accommodate to do a short sale and that it is much better for someone to do than it is a foreclosure, (I have left a few myself on a few doors). For those that do not know what a short sale is, which is basically when a homeowner sells his place for less that what he currently owes. now there are some benefits to doing a short sale, first one is when do you need to be a homeowner again?
Supposing that you may be able to compel your lender to allow you to do a short sale even if you have not missed any payments. Then FHA will allow you to acquire another home the next day, as long as the home you are acquiring is not at all superior to the home you now have. The challenging part will be getting your lender to let you to do the short sale, a lender may refuse to allow you to do a short sale, as stated before this is the difficult part procuring the approval when you have not missed a payment and a short sale transaction normally takes months to close. Assuming that you do miss payments and you do a short sale, FHA guidelines now state that you have to wait at least 3 years, before you could purchase another home provided that you were to try to acquire a FHA loan. This is where carrying out a short sale and just letting your place go to foreclosure genuinely does not at all make a difference in you getting financing again. Now the 3 years is from the date of closing not at all from the date you stopped making payments or the time you initiated the process towards your short sale or foreclosure.
But now moving on to other loans outside of simply an FHA there are a few differences when it comes to obtaining a loan other than a govt. loan, and doing a conventional loan. Currently Freddie Mac and Fannnie Mae are the two largest investors at this time. These two humongous govt. sponsored corporations acquire pretty much all the mortgages out there that the banks are now doing, reality is that most of the homes in Santa Maria are being done via FHA. With the condition that you do a short sale and from the date of closing your transaction your waiting period is merely 2 years to buy another house. In any event please keep in mind if you are on a separate loan whether it is investment property or you co-signed on it, there can be no mortgage lates within the 12 months of application. With the condition that you foreclose then the waiting period is 5 years from the date of your foreclosure date. That is a huge difference in regards to getting back in the market in addition to becoming eligible to obtaining sponsorship and becoming a homeowner again. Then it depends on credit, what is your credit going to be, its a fact that after doing a short sale or foreclosure you will be dealing with bad credit but its only temporary???
Keep in mind houses are so very much less now and I seriously doubt they will be doubling in 2-3 years time in essence if the house is unaffordable now you can be in a preferable financial position in 2-3 years in addition to with less stress. In closing on the assumption that you find yourself in a position of conceivably having to do a short sale or losing your house you are not alone and for many when taking their finances into consideration a number of homeowners have come to learn after some time that it could be a blessing in disguise.