The professional real estate and banking community has done a horrible job of educating the general public about the short sale process. Many homeowners kind of understand what a short sale is but they do not understand when and how to start the short sale process. Many clients I have worked with contact me very late in the process. Typically after the have received a letter from their mortgage lender. The fact that there is so many REO sales in Kansas is terrible. Many Kansas homeowners do not understand that they have redemption rights after the legal foreclosure sale and that is horrible. There is a lot of misinformation.
There are many misconceptions as to why a homeowner would short sale their home. The 9 reasons why a homeowner Should short sale their home versus letting their home go to foreclosure are: 1) A short sale would save a homeowner’s credit. Although there will be a few late pays, that is nothing to having a foreclosure on a credit report. 2) A short sale will save a relationship with the bank versus having a foreclosure. 3) A homeowner will be able to buy a home or automobile much quicker with a short sale versus a foreclosure. 4) A homeowner maybe eligible for a federal loan with a short sale. 5) With the Mortgage Forgiveness Debt Relief and Debt Cancellation Act, a homeowner’s debt in a short sale is forgiven. In a foreclosure, the debt is not forgiven. Many homeowners who go through a foreclosure, find themselves going through a bankruptcy also to stop the creditors. The bankruptcy is a double whammy on the credit report. 6) The homeowner has tax benefits with a short sale versus a foreclosure. 7) Some employers view a foreclosure as not dependable and some employers will not promote their employees. In some cases, some employees have been terminated from their jobs after going through a foreclosure. 8) A homeowner will get better interest rates after a short sale versus a foreclosure. 9) A homeowner who has gone through a short sale will find it easier and less expensive to rent versus going through a foreclosure. 9) A homeowner who has gone through a short sale will have removed the foreclosure stress. . A short sale should be started the second a homeowner realizes they can no longer continue making payments. Waiting even 2 weeks can limit a homeowner’s options. The 14 typical reasons why a mortgage lender would accept a short sale are (There are hundred more reasons, these are the top 14): 1) The homeowner is bankrupting their retirement savings. 2) The mortgage payment on the last adjustment is too high. 3) The homeowner is not eligible for a loan modification. 4) The homeowner received a loan modification, but now it is not working. 5) The homeowner had a job loss. 6) The homeowner had a illness or serious injury. 7) The homeowner is incarcerated. 8) The homeowner had a business failure. 9) The home has suffered significant damage or has a lot of differed maintenance. 10) A death to a homeowner. 11) The party inheriting the property can maintain payments. 12) A divorce to the homeowners. 13) The homeowner has had a job relocation or accepted a new job in a new city. 14) The homeowner has to much debt.
Although a homeowner can start the process at any point up until the day of the Foreclosure auction, obviously, the sooner the better. If the homeowner intends to have a successful short sale, start contacting a short sale specialist immediately. It takes time to properly prepare a successful short sale. . Many home owners try to time things perfectly in the short sale process. The homeowner wants to sell their home, rent down the street, and move in over the weekend. That’s a perfect world, and unfortunately short sales are far from perfect. Once a homeowner’s home goes under contract, which can be up to a year, it takes another 2 to 6 months to negotiate the short sale. Then another 30 to 60 days to close. The process can easily take 6 months to a year. Things aren’t perfect and it takes time.
So Why rent? Why should a homeowner go out an rent a home to early. Look at the positive side. If the mortgage lender wants to take months to negotiate the short sale, why go out an rent a home to early. Checkout rental options but don't rent a place yet. Save the money that would be normally used for rent. Again the process can take months, so why go out an rent a home to early.
If there is any advice that should be directed toward a homeowner it is on timing. The homeowner should forget about the way they want the timing to work out. It won’t work that way….it almost never does. Instead of trying to perfectly time everything, start the short sale process sooner by contacting a short sale specialist than later, then start planning the next move. It takes time.
Related Articles: 31 Reasons Why a Short Sale Gets Denied by the Mortgage Lender Chris Dowell is a 22 year real estate veteran. Having been a 3rd generation REALTOR, Chris did not know what a short sale was the first 14 years of real estate. In 2005, Chris had a listing that the bank thought was worth 1.6 million dollars. After doing an analysis on the property, Chris determined that the property was worth half that value. Since the homeowner didn’t have the money to payoff the mortgage, Chris assisted the homeowner in negotiating a short sale. Since that first short sale, Chris has assisted in many short sales in Kansas City. Chris is a partner of theDowell Taggart Teamof RE/MAX and a member of theKansas City Real Estate Network.
If you need help with a short sale, hire a professional. The Kansas City Real Estate Network helps struggling homeowners avoid foreclosure by assisting them with short sales. The Kansas City Real Estate Network has negotiated short sales in Gardner, Olathe, Overland Park, Leawood, Lenexa, Shawnee, Mission, Merriam, Prairie Villlage, Basehor, Tonganoxie, Lansing, Gladstone, Liberty, Lee’s Summit, Independence, Belton, Raymore, Pleasant Hill, Grandview and Kansas City.