Short sales are just about everywhere...it seems like you can't get away from them. Many sellers, loan officers and Realtors say they know a lot about short sales, but don't know how the short sale process works or even why a short sale is a better alternative to a foreclosure.
A short sale will enable the seller to purchase a home about 2 years after a short sale completion while a foreclosure will make you wait 5 years. In addition, short sales are better for the lender and it will keep the house occupied, with water and electricity still on and also keep the lawn mowed. Plus the bank will lose less money through a short sale.
No Foreclosure - foreclosures can be a hard and stressful process for a family.
Being Proactive - facing a foreclosure head on will help give you some control over the process.
Start Newer, Faster - minimizing damage to your credit can help you and your family get back on your feet faster.
May not owe anything after the short sale - you can try asking the bank to cancel your debt altogether. It does happen, but not all the time. Primary residences are usually treated more favorably by the lenders.
There is still damage to your credit - when a short sale is done, it is still documented on your credit but won't have the same impact as a foreclosure for most creditors.
Tax Consequences - there may be tax consequences if the bank forgives the debit and will issue a 1099 to the IRS for the amount of debt forgiven.
Bank could demand payment for their loss - the bank doesn't have to forgive the debt. They are able to ask you to pay them back for the difference on the sale and what is owed, but you will need to agree to this.
There are no guarantees in a short sale - whether the bank will approve the sale or forgive your debt, but short sales offer a better alternative to minimize the downside of facing a foreclosure.
Disclaimer -There can be legal and tax consequences. You may want to consult with an attorney or tax specialist before attempting a short sale. A real estate agent cannot give you legal or tax advice.
DO YOU QUALIFY? - Can you answer Yes to all 4 Questions?
1. The Homes' Market Value Has Dropped. Hard comparable sales must substantiate that the home is worth less than the unpaid balance.
2. The mortgage is in or near default status.
3. The seller has fallen on hard times. The seller must submit a letter of hardship that explains why the seller cannot pay the difference due upon sale, including why the seller has or will stop making the payments.
4. The seller has no assets. The lender will want to see a financial statement and recent tax returns.
WHAT TO EXPECT?
1. The lender will want to see your entire financial picture.
2. The bank may want you to sign a promissory note for the deficiency between the amount owed and the amount your home is sold for.
3. As the seller, you cannot receive any proceeds from the sale. None. Period. Your Realtor and title company may have to work for reduced fees.
4. The banks are overwhelmed with short sales and many times a decision can take up to 60 days or longer.
5. The property may be foreclosed on during the short sale process. Be sure to use an experienced short sale company who should be able to get the foreclosure postponed.
6. Do not expect to receive information on a regular basis, as there may be weeks that go by without news from your lender.
7. The bank will want to get a BPO (Broker Price Opinion) and/or an appraisal of your house.
8. Be patient. This is the best policy. Try to avoid being stressed out over something that you are not able to control.
With wanting to move, I would say short sale is the first thing you should look at. This allows you to sell. Your spouse is in the military and not in active duty here. You need to have a compelling reason. I think you may have it. Sully is correct that you need a lawyer to help you through this along with a realtor. The lawyer will pay for themselves in reducing any money you may owe once the home sells, if any.
Realize this will not be a quick process and move carefully through it educating yourself as much as you can. You will be the center of all activity. Your motivation will be what gets this done. The bank will often be waiting on you even when you do not know it so follow up consistently with them.
Your second option is deed in lieu where you turn the deed over to the bank. This will hit your credit very hard. Only do if absolutely necessary.
Good Luck and God Bless You and your husband for your service to our country in it's time of need.
Kerry S. , Realtor, AR
If You Bought the House in Arkansas , Your Husband May Not Be Responsible
I am Retired Military , A Real Estate Broker with Office in Springdale . Would be glad to go through your options with You . Have an Attorney who can also Guide You .
Key is to stay out of a Foreclosure , Could lose your Home and Still owe the Money Difference . That would not be Good .