Wednesday Jan 06 2010
The Real McCoy: Why should I do a short sale on my home?
By: Kari McCoy
Dear Kari, I lost my job and I can’t afford to keep making my house payments. The only thing I see in sight is foreclosure, is there anything I can do to save my credit? Answer: Foreclosure is extremely bad on your credit rating and can cause you to lose hundreds of FICO points. There could be an option if you were to Short Sale your home. The Short Sale process may provide some relief for home owners facing these difficult times and which may be resolved in a manner that allows the homeowner to preserve their situation. This is when the bank accepts less than you owe and will create not nearly as devastating a scenario as foreclosure. You might be wondering why we are not discussing a loan modification at this point. Because if you have no income, you can’t have a loan modification. A loan modification is similar to qualifying for a regular loan. If you have too much debt, you will most likely not qualify. That’s why your best plan of attack maybe a Short Sale. Usually the lender will not discuss a Short Sale unless the loan or loans are behind in payments. A notice of default occurs typically if you missed three or four loan payments and the bank will issue the notice. It states the timeline for your home being sold at auction. You will have roughly 90 days and during this period if you can pay all fees incurred; you will be able to stay in your home provided that you can make consecutive payments, which usually doesn’t happen. At this point when it is not possible for you to pay all monies owed, you can try to Short Sale and find a buyer. The guideline of the foreclosure is still looming on the horizon even when you do find an interested buyer, either through a Realtor or an investor. It is at this point the negotiation with the bank starts. If you have multiple loans on the property and they are from different banks, separate communication and negotiations must be satisfied to include each bank and loan on the property. When you get the bank to accept your offer, you as a home owner, must find a new place to live. The transaction can take usually 15 days on extreme situations and up to nine months or longer. During this time, the bank will typically allow you to stay in the home. Please know the home owner must qualify and be accepted to continue with the Short Sale. Who is a Short Sale candidate? In short, homeowners that truly can’t afford to make their mortgage payments. Among the “life happens” developments that frequently lead to difficulties regarding mortgage payments include financial hardship, illness, divorce, reduction in income, family crisis and job loss. Increasingly, the most common reason for home owners struggling with their mortgages is they just can’t afford it. They got in over their heads and or their mortgage payment adjusted up to a point beyond their ability to pay. Please know that with most Short Sales, the home owner does not come out with money in his pocket. Kari McCoy has been a Realtor for 25 years and owns the Kari McCoy Group, Residential Real Estate, at Coldwell Banker. She can be reached at 941-9540, firstname.lastname@example.org or at Karimccoy.com.