Are you considering a short sale, but don’t know where to begin? Here’s a quick overview of short sales, how they’re different from foreclosures, and how to start the process.

As a Short Sales and Foreclosure Resource (SFR®), I welcome your questions anytime. Contact me, and let’s figure out the best solution for you.

What is a Short Sale?

There are 5 basic elements of a short sale:

  • The homeowner is the seller.
  • The homeowner has a valid financial hardship that makes it impossible to keep up with the mortgage payments.
  • The seller’s net proceeds aren’t enough to pay off the existing mortgage balance.
  • The seller does not have additional funds elsewhere to make up that difference.
  • The lender, or lienholder, agrees to the sale, and accepts less than what is owed.

Short Sale vs. Foreclosure

You don’t have to agree to short-sell your home. You could simply walk away from the property, and let it go into foreclosure.

But would you want to have a foreclosure on your credit record?

So why choose a short sale over a foreclosure?

  • Credit Report – Short sales do not appear on your credit report. Foreclosures, on the other hand stay on your credit history for 7-10 years.
  • FICO Score – A short sale will lower your FICO by as few as 50 points, and affect your FICO for up to 18 months. Foreclosures will lower your FICO by 200-300+ points, and affect your score for a minimum of 3 years.
  • Buying Again – After a short sale, you may be able to qualify for a mortgage to buy a home immediately. After a foreclosure, you can’t get a mortgage for 5-7 years.
  • Owing Money Later – During the short sale negotiations, in most cases, the lender agrees to release the homeowner from any future deficiency right. After a foreclosure in California, many loans give the lender the right to pursue the homeowner for a deficiency.
  • Your Employment – A short sale does not challenge most security clearances. A short sale will not affect current or future employment. On the other hand, foreclosure often causes a security clearance to be revoked, and a position terminated.
  • Financial Incentive for Short Sales – If you short sell through the Home Affordable Foreclosure Alternatives Program (HAFA), borrowers receive $3,000 in relocation assistance at closing.

If you have decided to pursue a short sale for your home, contact me, and I can help check your qualification with your mortgage servicer. Here’s how we will begin:

Preparing for a Short Sale – Lender Package

I can help you prepare the short sale package to submit to your lender. Every lender has different requirements, but they usually include a financial hardship letter, and income documentation, such as W-2s, paystubs, bank statements, and tax returns.

Putting Your Home on the Market

Depending on your mortgage servicer, the timing of each step varies. Sometimes, you need to have an offer in hand before you can apply for a short sale. Other lenders want to approve the short sale first, and even set a price for the listing.

Even though the timing varies, listing your home on the market is the same process as any traditional sale. Read my article about how I prepare to list your home for sale in the MLS.

Once you accept an offer, this gets submitted to the lender for approval. This approval process can take anywhere from 2 weeks to 6 months, depending on the lender, and also on the diligence of your real estate agent.

Contact Me for Assistance

As a Short Sales and Foreclosure Resource (SFR®), I have the advanced knowledge and education in distressed property transactions. By evaluating your particular situation, I can recommend finance, tax, and legal specialists, suggest foreclosure avoidance assistance, and help you to avoid rescue scams. Contact me to discuss all of your options.

Mylene Merlo is a licensed REALTOR® with Allison James Estates & Homes in Carlsbad, California. As a Carlsbad Real Estate Agent, I specialize in residential North County San Diego real estate. I have earned the Green designation and the Short Sales and Foreclosure Resource certification from the National Association of REALTORS®. If you have any questions about real estate in Carlsbad, Cardiff-by-the-Sea, Encinitas, Escondido, Oceanside, San Marcos, Solana Beach, or Vista, call or text me at (760) 637-7231 or send me a message.

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