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only you can decide if a short sale is right for you

only you can decide if a short sale is right for you
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Only you can decide if a short sale is right for you. 

If you can no longer afford your mortgage payments and/or have fallen behind with your payments you must consider your options. 

If you decide to attempt a short sale you must understand the process from a lender’s perspective. In today’s Bradenton - Sarasota market a lender is more willing to work with borrowers facing financial hardship.  A short sale is likely to be approved under the following conditions:

  • You are facing a hardship that makes paying your mortgage unlikely. A lender will not accept a short sale if you simply don’t want to pay your mortgage.  You must be able to demonstrate a true hardship like death of a spouse, illness, disability, loss of job, or some type of financial crisis.
  • You are at least one month behind on your mortgage payments. Typically lenders will not consider a short sale if you are current with your payments. Even if you are only one month behind, you will probably be dealing with the Customer Service or Collection Department.  Their job is to collect the payment.  Short sales are handled by the Loss Mitigation Department.
  • You have a ready, willing, and able buyer.  If you try to find out what short sale price the lender will agree to before you find a buyer, you will not be successful.  The correct order is to put the home on the market, find a buyer, execute the contract, and then contact the lender.  Expect to negotiate the pay-off acceptable to the lender and the price acceptable to the buyer.
  • You have depleted your savings.  If you have savings enough to cover the payments your short sale will not likely be approved. Remember, it’s not that you don’t want to make the payments, but that you cannot make the payments.

I previously wrote about the Borrower’s options.  Here is a summary:

  1. Contact your lender and ask for their suggestions: Homeowners facing financial difficulties often make the mistake of avoiding their lender, which is exactly the wrong thing to do. If you are unable to make your mortgage payments, contact your lender as soon as possible and explain your situation. Find out your options from your lender.
  2. Try to reinstate the mortgage: If you think you might be able to catch up the back payments in time, ask the lender to work with you.  If you can show your ability to bring the mortgage payments up to date, your lender will probably agree not to foreclose.
  3. Work out a forbearance: A forbearance is when the lender agrees to allow you to skip payments or make reduced payments for a period of time.   Eventually you will be responsible for the repayment of the accrued interest and principal.
  4. Refinance the loan and consolidate your debt: With a good credit history, you may be able to consolidate your debt with a loan that requires a total monthly payment of less than you're paying on all your other loans put together. Be careful with this approach because you may only be making matters worse.  Lenders will typically not accept a short sale when the loan is less than one year old.
  5. Give a deed in lieu of foreclosure: You may be able to offer the lender the deed in exchange for them not foreclosing on you. You lose the house and your equity, but retain your credit rating. In a market with declining values it is unlikely that the lender will accept a deed in lieu of foreclosure.
  6. Foreclosure: This is, by far, the worst option for most people because of its wide ranging effects emotionally, financially, and credit wise. With foreclosure you lose your home, lose your credit rating, and any equity you may have built up. You will probably not be able to buy another home for years to come and your credit will be ruined for years. You may also face a deficiency judgment. This is when you still owe what the lender lost.
  7. Negotiate a short sale: Lenders typically want to avoid foreclosing, because of the costs associated with it. Most lenders are open to negotiating a short-pay on the loan. If you can demonstrate your financial hardship to the lender this may be your best option. This isn't something you should attempt alone.  Talk with a knowledgeable Realtor.

Once the Manatee County, Florida homeowner has decided that a short sale is their best option they should IMMEDIATELY contact an experienced Realtor®. A Realtor® who is knowledgeable about short sales can skillfully guide the homeowner through this challenging process.

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