To Short or Not To Short – That is the Question?
With Arizona as the number 2 state for most foreclosures, the housing market is at the top of my client’s worries for financial security. Since I want to make sure the best long-term financial decision is made I sought out Real Estate Short Sale Guru – Julie Vogan with United Brokers Group to enlighten me on the process. Here is what she had to say, “A common misconception about short sales is that they are quick, or at least a faster than “normal” real estate transaction. In reality, the “short” in short sales has nothing to do with timing. Short sales usually take longer than traditional real estate sales – running anywhere from 2 to 5 months-plus from contract to closing.” She also stated that the “short” is actually the amount the seller would need to pay against the loan unless the lender agrees to accept the negotiated sales price and convey the deed to the new buyer.
Hear are a few of the most common myths that Julie hears and the facts to shatter them:
Myth: It’s smarter for homeowners to walk away than to short sell.
Fact: Typically, depending on the number of delinquent mortgage payments and how they affected the borrower’s credit score, the current guidelines allow for a repurchase 2 years after a short-sale. This assumes that the borrower’s other credit is in good standing. If a borrower chooses foreclosure, the current wait is 3 years on FHA loans and 7 years on Conventional loans.
Myth: A short sale is the same as a pre-foreclosure.
Fact: A short sale is a home being sold for less than what is owed on it. A pre-foreclosure is a home that is in some stage of the foreclosure process because the mortgage payments are in arrears. Many short sales are in the pre-foreclosure process however some short sales can be closed even though the seller is not delinquent. These generally require a serious medical event, job transfer out of state or other severe circumstance.
Myth: The buyer’s broker – or even the buyer’s offer – has much to do with getting a short sale approved.
Fact: Writing a clean offer with a qualified buyer is what gives a short sale seller confidence that the transaction will close. Both the buyer’s agent and seller’s agent are critical components in bringing the transaction to a successful completion.
Julie also informed me that the process and rules are ever changing so before making a decision seek out a qualified broker or attorney to weigh all of your options. Keep in mind that both will have a negative effect on your credit report but a foreclosure is much more damaging. Loss in your FICO score for a foreclosure is 200-280 and a short sale 75-125.
Disclaimer: This information is intended for general use, every borrower is different, and every lending institution has specific rules that govern short-sales. The first step is to find a competent real estate agent that has successfully negotiated short-sale transactions.
For more information on the process, or to have Julie provide you with an assessment of your home value, contact: Julie Vogan, United Brokers Group, 480-694-0756.