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Short Sales
What is a short sale?
In real estate terms, a sale is labeled a ‘short sale’ when the profits of a sale are less than the debt owed and secured by the liens against the property. The property owner is not able to repay the full amount in this circumstance, and the lien holders agree to release their lien and accept less than the original amount of debt owed.
How does a short sale affect me?
A short sale is a better option than a foreclosure. A foreclosure has massive effects on your credit history and personal life while a short sale is not as damaging. A short sale will only briefly effect your credit score (12-18 months) while a foreclosure can affect you for up to 3 years. Additionally, a foreclosure can be listed on your credit history for over 10 years while a short sale cannot be listed on your credit history at all.
For more about the differences between a short sale and a foreclosure, check out our guide.
Foreclosures
What is a foreclosure?
The foreclosure process involves the bank selling and taking possession of a mortgaged property as a result of the mortgagor’s failure to keep up mortgage payments. Being the mortgagor who goes through a foreclosure is bad for several aspects of your life. A foreclosure can affect your credit score, credit history, your ability to buy a house in the future and even your employment. The bank can also pursue you for the balance of your mortgage.
For more about the differences between a short sale and a foreclosure, check out our guide.
Bankruptcy
What is a bankruptcy?
Bankruptcy is a legal process involving a person or business that is unable to repay outstanding debts. The bankruptcy can be declared by the debtor or on behalf of the creditors. Once bankruptcy is petitioned, all of the assets of the debtor are measured and evaluated and used to repay part of the debt. A successful bankruptcy occurs when the debtor is relieved of the debt obligations incurred prior to filing.
How does bankruptcy affect real estate?
When an individual or business is faced with a financial crisis, there are faced with two choices: foreclosure or bankruptcy. Believe it or not, bankruptcy is usually a better option. Foreclosure should be avoided at all cost due the damaging affects they have on your credit score. Bankruptcy, however, gives the person or business a chance to start over. This can allow for a discharge of debts by forming a repayment plan of the debts.
Do I need to do a short sale if I already filed for Bankruptcy?
Yes. Many homeowners mistakenly feel that they can’t, or there is no purpose in doing a short sale if they have already filed for bankruptcy. This is a myth and a mistake. Doing a short sale post-bankruptcy will have no negative effects and has many benefits. Check out our guide to learn more about how a short sale can help you even after filing for bankruptcy.
Loss Mitigation
Loss mitigation is the process of negotiating the terms of a mortgage to prevent going into foreclosure. There are several ways loss mitigation can take place.
Loan modification:
This is a process whereby the homeowner’s mortgage is modified and both lender and homeowner are bound by the new terms.
Short sale:
This is a process in which a lender accepts a payoff that is less than the principal balance of a homeowner’s mortgage and allows the homeowner to sell the home for the actual market value. This is the process in which a lender allows the homeowner to sell the property for less than the mortgage and releases the homeowner from the debt.
Short refinance:
This process involves a lender reducing the principal balance of a homeowner’s mortgage in order to allow the homeowner to refinance with a new lender.
Deed in lieu:
A Deed in Lieu of foreclosure (DIL) is a disposition option in which a mortgagor voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage.
Cash-for-keys negotiation:
The lender will pay the homeowner or tenant to vacate the home in a timely fashion without destroying the property after foreclosure.
HAFA Short Sale
Home Affordable Foreclosure Alternatives is part of the federal government’s Making Home Affordable program. With a HAFA short sale you may qualify for financial assistance to help with relocation costs. This type of short sale will completely release you from your mortgage debt.With Home Affordable Foreclosure Alternatives (also known as HAFA), we can determine an appropriate list price and start pursuing approvals before you list the property or receive an offer.HAFA eligibility requirements may vary.
Terms and Definitions
PARTIAL INTERESTS
Ownership of some portion of the ownership rights to real estate, such as mineral rights.
C.O. – CERTIFICATE OF OCCUPANCY
An inspection is performed prior to the issuance of a Certificate of Occupancy to insure that the new or renovated structure meets all necessary fire protection requirements and that all improvements have been completed in accordance with code.
HUD – UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Settlement Statement is a standard form in use in the United States of America which is used to itemize services and fees charged to the borrower by the lender or broker when applying for a loan for the purpose of purchasing or refinancing real estate.
REO
REO stands for Real Estate Owned. If a property is REO, this means that the bank owns the property as the result of a foreclosure. Read on to learn more about REO properties.
