Monday, February 18, 2019

The Skinny On Short Sales

by Victoria Attanasio (writer), Santa Clara County, February 05, 2009


A short sale doesn't have to be a tall order.

By definition short sale means that the value of a home is less than the total loans on the property. In a short sale, the bank forgives the debt with a few qualifying factors. The sellers/homeowners of a short sale home do not pay commissions, closing fees or other associated costs, the bank approves the offer and then pays the costs associated. The process requires patience and you do have quite a bit of time to get the home sold. 

If you have missed a payment, the bank will file a Notice of Default typically once you are 3 months late on the mortgage. In that document, the bank sets a date for 3 months later for a Trustees Sale, more affectionately called, Sold on the Courtroom Steps. That gives a seller 6 months from the 1st missed mortgage payment to either sell the home or bring the loan payments current. After the Trustees sale the home is considered "foreclosed" and the credit implications are vastly different from a short sale.

We are seeing credit dings that range from 50-100 points for a short sale and up to 280 points for a foreclosure. The credit ding for a short sale is on your credit report for up to 2 years and up to 5 years for a foreclosure. If you want my professional forecast, I think lenders are going to work on minimizing the credit impact to consumers who have had to go through a short sale. The reason I think this is that banks need to put consumers in a position to purchase. The sooner they figure out how to navigate the ding on the credit report, the sooner bankers will be able to lend money to a consumer with a short sale in their history.

About the Writer

Victoria Attanasio is a writer for BrooWaha. For more information, visit the writer's website.
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2 comments on The Skinny On Short Sales

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By 'Mean' Mike Duffau on February 06, 2009 at 07:04 pm

good piece of info when i get a house....

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By Just Average Joe on March 06, 2009 at 04:21 pm

Victoria, hope's it's different in San Francisco than here in Reno.  I've seen too many of those MLS short sale or forecllosed on listings with lender or title requirements/steering illegally stated in them  A house seller or Realtor or anyone requiring a house buyer to use only a specified lender is a RESPA violation.    A house seller or Realtor or anyone requiring a house buyer to use only a specified title insurance provider is a RESPA violation.   Both these stering issues I can see have been problems for years in RSAR and MLS.  Here we have a former RSAR President doing blantant and publicly published illegal steering and she's on the RSAR Ethics' Committee!  What has made these stering issues escalate even more is the foreclosures.  The banks that have done these just plain stupid foreclosures tell me, my broker and my clients it's them that's going to do the buyer's financing, and it's them that's deciding who the buyer's title insurance is to be provided by.  Doesn't matter we tell them over and over it's illegal.  The banks don't care that what they are doing is illegal.  Buyers get mad that can't use their own lender or title company, so they walk.  That further reduces the pool of buyers to buy these short sales or foreclosures.  And with 85% of the current Reno MLS as either in foreclosure or now bank owned due to foreclosure, it ain't a pretty picture when what few buyers there are, walk.

Here in Reno we're averaging a loss of 2% a month sin house values.  I think it's due to the lenders.

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