General Information about Short Sales

Please spend a few moments to review the information below.

If you are considering a short sale, please call Shawna from our Short Sale team for a step by step guide on the process of selling your home.

Let us help you

*Collect all required documentation the bank will require

*Prepare Listing Paperwork / Prepare your Home to be listed for sale

*Aggressively market your home to produce a willing and able buyer

*We will present your offer to the bank for approval

*When bank approves Short Sale, be prepared to move (we don’t help move )

Shawna can be reached directly at 480-449-6632

What is a Short Sale?

A Short Sale is when the homeowner/seller is selling their home for less than the value of the loan. The homeowner most likely is facing foreclosure if not already in pre-foreclosure. In reality, the homeowner cannot sell the property without the approval of their lender(s). This process depends on a few factors such as if there is a foreclosure date set yet and how much money the lender is losing. The approval process can take anywhere from a couple weeks to 3 months.

Every short sale is different! The advantage to a short sale is if the buyer is flexible on waiting to hear an answer and the buyer can still look for other property while waiting. If the buyer finds another property to place an offer on, they can cancel the short sale contract and receive a full refund of earnest money prior to lender approving the short sale. On the downside, most of these properties are “as is” with no repairs being done by seller and can take a very long time.

How is the Seller’s Credit Affected?

According to Christopher Rockey, Director of Education for Mortgage Resolution Services, sellers will take a bigger hit on their credit report by going through foreclosure or giving the lender a deed-in-lieu of foreclosure.

Foreclosure or Deed-in-Lieu of Foreclosure

Both of these solutions affect credit the same. Sellers will take a hit of 250 to 280 points. This means if a seller’s FICO score before foreclosure is 680, it could dip as low as 400.

Short Sale

The affect of a short sale on a seller’s credit report is much less damaging. The ding on credit will show up as a pre-foreclosure in redemption status, Rockey says, which will result in a loss of 80 to 100 points. This means a Short Sale with a previous

FICO of 680 will see it fall to 580 to 600.

Important Note:

Borrowers must realize these numbers are only theory. They must continue to be responsible with their other consumer debt. Often if the hardship is financially related, borrowers fall behind on other consumer responsibilities.

Waiting Period Before Buying Another Home

Foreclosure or Deed-in-Lieu of Foreclosure:

Recently Rockey said, Fannie Mae and Freddie Mac have changed their guidelines. Foreclosure is a minimum of 5 years with a FICO score of 680 and 10% down. A Deed-In-Lieu is 4 years, 680 FICO, and 10% down.

Short Sale

2 years, no minimum credit score and no minimum down payment. These numbers are extremely important to consider.

Short Sale/Foreclosure Deficiency Judgments

The bad news is a seller could be subject to a deficiency judgment for the difference between the loan amount and the amount paid. In Arizona, purchase money loans are not subject to deficiency judgments; however, hard money loans, home equity loans and refinances are.

Exception: refinances can be anti-deficiency if paying off purchase money loans.

The lender has sole discretion whether to pursue a deficiency judgment in those instances when the judgment is permitted. To determine whether a pending Foreclosure or Short Sale is subject to a deficiency judgment, clarify the issue with the lender or talk to a real estate lawyer. For sellers trying to decide whether to let a home go through foreclosure versus attempting a Short Sale, salvaging their credit is the main advantage to doing a Short Sale. Be sure to seek legal and tax advice before making this decision.