Short Sale Process For Home Buyers and Sellers
In this article, we will cover the short sale process for home buyers and sellers. We will discuss some of the common frequently asked questions about the short sale process for both buyers and sellers. Both buyers and sellers will need to realize the short sale process of a home does take time. Both buyers and sellers, need to deal with the stress and the outcome after everything is all set and done. At the end of the day, a win-win situation would be for the buyer to get the home of their dreams at a good price, and for the seller to walk away with a better outcome with a short sale versus a foreclosure.
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What Is The First Step In a Short Sale Transaction?
Once you have decided to do a short sale, when should you stop paying my mortgage? The answer to that depends on your current credit score. If your credit is already pretty low, and you cannot afford to pay the mortgage, it may make sense for you to stop paying immediately.
If your credit isn’t bad, and you can afford to pay the mortgage, you may want to continue to pay, as any additional late payments reflect poorly on your credit. A drop in credit scores is temporary. Once your credit scores take a toll, with time and credit rebuilding, they will recover.
How Does Short Sale Process For Sellers Affect Credit?
How does a short sale affect my credit? After the short sale is completed, it will show as “settled”. A short sale can impact your credit score up to 100 points or more. Creditors look closely at the last two years, and you could qualify for a mortgage again soon. Fannie Mae recently changed their guideline and increased its mandatory waiting period after bankruptcy and short sales from two years to four years.
It is important to rebuild credit after the short sale by reducing your debt-to-credit ratio (creditors prefer 10% of debt-to-total credit available) and making payments on time. These actions will bring credit scores up so homebuyers can qualify for a mortgage after four years.
Is Contacting Lender Required Prior To Short Sale Process?
Do I need to contact my lender? No, you do not have to contact your lender if you have hired a real estate agent and attorney. They should handle that for you. You will give them the authorization to speak to them and negotiate on your behalf.
Going Through Short Sale Process Alone
If you decide to go it alone, you will need to contact the lender and provide all the necessary documents to the lender(s). However, I highly recommend the use of a professional with experience in this area. The transaction can be highly complex. Especially if a homeowner’s association or liens are involved.
Homeowners will want someone to guide them through the process. Moreover, the bank pays its fees. They handle the majority of the work, alleviating stress and allowing you to focus on other things. Also, it will be done correctly with a professional’s help.
Notices By Legal Team or Lender During Short Sale Process
What do I do with letters I receive in the mail from the lender—or an auction notice? Forward all letters to the short sale certified agent and attorney. If you receive an auction letter, notify them immediately. This holds true especially if you do not yet have a contract on the house. I can’t stress this enough. If you do not, depending on where you are in the process, there may not be enough time to submit all the paperwork and the auction will proceed as scheduled.
Short Sale Process of Listing Home on The Market
After I decide to do a short sale, how soon should I put my house on the market? After you decide to proceed with the short sale, you want to put the house on the market as soon as possible if you are behind on your mortgage. Once you have missed three consecutive payments, the house could be scheduled for auction at any time. For most lenders, if you do not have a contract on the property 30 days prior to the auction, the sale cannot be stopped unless you declare bankruptcy.
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Listing Your Home On The Market During The Short Sale Process
Putting the house on the market and finding a buyer takes time. Depending on the market and time of year, this process can take several months. Documents need to be signed to list the property. Pictures need to be taken. Signs are placed in the yard (although this can be optional). An offer signed by both parties must be submitted by the bank with all required bank documents. Some mortgage documents required to process a loan such as pay stubs from the seller or proof of funds from the buyer may need to be gathered, and all of that takes time.
Short Sale Process FAQ and Answers
- How soon do I get the seller’s moving credit?
You will receive the moving credit at closing - I don’t want my neighbors to know I am doing a short sale. Do I have to have a sign in the yard?
No sign is necessary, but it is helpful in finding a buyer. The only way the neighbors will know if it is a short sale is if they are actively looking for information on the property, or if you tell them. - After we get a contract on the property, how soon do I have to move out?
You can move out as soon as you’d like. It is not necessary until we have approval from the lender.
At that time, the lender will give a deadline date by which you need to close, or you could forfeit the seller’s moving credit.
You usually have an adequate amount of time, generally a month or two, to find a property. - If I am a member of a homeowner’s or condo association, do I have to pay the assessments if I’m doing a short sale?
Yes, continue to pay the assessments. If you don’t, the association may be able to take possession of the property and then sue you for back assessments plus damages - Am I responsible for lawn care?
Yes, continue to cut the grass. If you don’t, you will receive a citation from the city and will have to pay fines - Take me through the whole short-sale selling process, through each step. What can I expect?
After all paperwork is completed and submitted, the property can be listed. Once it’s listed, you will begin to receive showing requests.
Do your best to accept them since the sooner we can show it, the sooner we can get a contract. Once a buyer submits an offer, you will accept the offer and it will go to the bank for approval. At this point, you do not have to continue to show the property. During that time, the buyer may want to do an inspection and an appraisal by the bank will be done.
After those are complete, the bank will usually give a counteroffer and negotiations will begin between the buyer and the bank
After they have come to terms, if the buyer is financing, there is a waiting period when the loan is approved. If for some reason the bank and buyer don’t come to terms, the buyer gets tired of waiting, or the buyer doesn’t get financing, the property goes back on the market and the process begins all over.
If you have other questions about short sale process for home buyers and sellers, you can contact Gustan Cho Associates by calling us at (800) 900-8569 or text us for a faster response. You can also email us at alex@gustancho.com. Our expert Loan Officers are available even during weekends and holidays!
