By Scott Coloney
During this time of economic uncertainty, it is imperative for homeowners facing the unfortunate situation of losing their home to foreclosure to understand the options available to them. When behind on mortgage payments, determining if a short sale is a viable option can help a homeowner avoid foreclosure, additional fees paid to the lender for costs associated with the foreclosure-action and also avoid a blemish that will appear on their credit report for years to come.
Although often perceived by real estate agents as a “sales” transaction, a short sale is actually a financial and legal transaction that should be facilitated by experts in those respective areas who can help see the transaction through from start to finish.
Though seemingly fundamental, I thought it would be helpful to review exactly what a short sale is since its popularity generally increases when the market is in a state of turmoil.
A short sale transaction occurs when there is a declining market and personal financial conditions force a property owner to sell their property for less than what is owed on the mortgage and the lender agrees to accept less than full amount as payment in full. There are many benefits to the pursuit of a short sale for all parties involved:
1. The seller benefits by not having to go into foreclosure or face as harsh of a credit rating consequence, but receives no funds at closing.
2. The buyer benefits by getting a great value on a new home purchase.
3. The lender benefits by avoiding a costly foreclosure process and being responsible for property taxes, insurance costs and maintenance of the property, in addition to facing any code violations that may arise due to the lack of upkeep.
If the seller qualifies, a short sale is much more advantageous than foreclosing on the home. Here’s why:
• Property is sold and lender accepts proceeds as payment in full
• No deficiency judgment lien filed against the owner
• No foreclosure reported to credit bureau
• Reflects on sellers’ credit report for 1 – 1.5 points
• Sellers’ FICO score will drop between 75 – 125 points
• Lender takes title and forces sale of the property
• Lender has the ability to file a deficiency judgment against the seller and any other property they may own
• A foreclosure will be reported on the sellers’ credit bureau
• Reflects negatively on the sellers’ credit report for 3 to 5 years
• Sellers’ FICO score will drop between 200 to 280 points
It is critical to the financial stability and well-being of the seller that real estate agents realize the importance of working with financial professionals equipped to handle the daunting details, paperwork and negotiations with the lenders involved in a short sale transaction to ensure the best possible result.
There is no mistake that real estate agents have a vital role in the short sale process, and that is to focus on marketing and selling the home, since it’s obvious that there cannot be a short sale without a sale! A short sale transaction is complicated, time consuming and just plain hard work. The wise thing to do in order to achieve the best results is to work in conjunction with a professional team of financial, legal and credit consultants.
For example, the Foreclosure Response Team aids homeowners throughout the state of Florida facing foreclosure. With a specialization in short sale transactions, the Foreclosure Response Team is made up of professionals in the areas of finance, legal, sales and credit, serving as an invaluable consultant and assists in the processing of any special needs that a sellers’ transaction may require.
The Broker Affiliate Program recently developed by the Foreclosure Response Team is a systematic network that provides affiliate brokers and agents that ill-equipped or inexperienced in short sale procedures with valuable marketing and professional resources needed to increase the sellers’ success rate.
Through the Foreclosure Response Team’s departmentalized structure, real estate agents are relieved of the cumbersome and complicated tasks associated with the administration, management and processing of short sale transactions, allowing them the opportunity to focus on the sale of the home.
It’s clear that a short sale, in particular, is a unique transaction that needs to be facilitated with extreme care and competence. That’s why working with a team of professionals is the best strategy for success.