In today's unsteady economy, many homeowners
experiencing financial difficulty have
turned to a short sale as a means of
avoiding a foreclosure.
A short sale* is a transaction for the sale
and purchase of real property where the
purchase price is less than the amount
required to pay off the liens on the real
property, such as mortgages, judgments,
taxes, homeowner or condominium association
fees, assessments, as well as closing costs
including but not limited to brokerage
commissions, realty transfer fee, and
attorney's fees.
*Short sales can have serious legal, credit
and tax implications. Navigating through
these long and often-confusing transactions
can be difficult. It is advised that you
work with a knowledgeable REALTOR® and
consult an attorney or tax professional with
regard to potential short sales whenever
possible.
NJAR® provides
resources
for REALTORS® to navigate and assist in
short sales.
Facing Foreclosure?
If you are currently a mortgage holder and
you are having difficulty making your
payments, first consult your lender or loan
officer to explore options other than
foreclosure, such as forbearance or
refinancing. There are loan modification
programs and refinancing options being
offered through the following organizations:
Beware of foreclosure recovery scams, or
fraudulent companies that target borrowers
at risk for losing their home.
Read the warning signs to protect yourself
from becoming a victim. View trustworthy
resources from
state and local government agencies aimed at
helping you to avoid foreclosure.
Brochures are available from the U.S. Department of the Treasury (Consumer Tips for Avoiding Mortgage Modification Scams and Mortgage Rescue Scams) and the Office of Thrift Supervision (Foreclosure Rescue Scams/How to Avoid Becoming a Victim).
Consider a Short Sale
If you have missed payments on your home,
call your mortgage company. If losing your
home is in the foreseeable future, consider
a short sale. Some lenders may even have a
short sale or loss mitigation department.
Short sales may appear on your credit report
as "pre-foreclosure in redemption," rather
than "debt discharged due to foreclosure."
Thus, people who come to an agreement on a
short sale with their lender could do far
less damage to their credit rating than
those who go through a foreclosure.
Additionally, a benefit to a short sale is
that borrowers will generally face a shorter
waiting period before they can obtain
another mortgage.
Begin collecting financial documents as the
bank or lender will require proof of
financial trouble through documentation and
a "hardship letter" explaining the
circumstance(s). Keep in mind that
documentation and eligibility requirements
can vary based upon specific servicers and
guidelines.
Depending on the liens you have on your
property, further approval may be necessary
from secondary lien holders. By accepting a
short sale, your lender may agree to accept
less than the amount required to pay off the
liens on the property. It is recommended
that homeowners contact a knowledgeable
REALTOR® to help navigate the transaction
and market the property to potential buyers.
Look for a REALTOR® in your area.
Short Sale Information for Buyers
Due to the recent market correction, buyers
can find homes at more affordable prices
than at the height of the market. The
foreclosure and short sale markets have also
become more prevalent. Buyers interested in
purchasing a short sale or foreclosed
property are advised to work with a REALTOR®
who will help in the step-by-step process.
Buyers can consult with a REALTOR® to
negotiate with a lender on a price to
purchase the property. Note: this can be a
lengthy process as lenders tend to evaluate
the financial proficiency of any and all
offers.
Be prepared to provide proof of income and
produce financial documentation in the
mortgage pre-approval process. Due the
subprime mortgage situation of the previous
few years, lending standards now require
more time and documentation.
If your offer is accepted, there is a good
chance the home will be sold "as is," which
means there is no negotiating when it comes
to the seller/lender and home improvements.
It is important to obtain a thorough home
inspection to assess the condition of the
property.
The U.S. Department of Housing and Urban
Development (HUD) offers a program to
finance the costs of rehabilitation and
improvements made on the home. Rather than
obtain separate mortgages to finance the
purchase and rehabilitation of a home, the
203
(k) program offers buyers the opportunity to
obtain a single mortgage from a Federal
Housing Administration (FHA)-approved lender
to finance the purchase and subsequent
improvements that may need to be made to
occupy the residence.
Foreclosures & Short Sales in the News
Two Alternatives to Foreclosure,
Wall Street
Journal, July 27, 2008
Dual
upside to foreclosure alternative, CBS The
Early Show, June 21, 2007
Shorts
Sales and Foreclosures Make Way Into Market,
Realty Times, February 2007
Resources for Improving Credit & Buying a
Home
Making Home Affordable from the U.S. Department of Treasury
Foreclosure Mediation from the N.J. Judiciary
Mortgage Tips from the Federal Reserve Board
Refinancing Instructional Video from Freddie Mac
Loan
Preapproval - The Advantages of Loan
Preapproval
Preapproval Letters Give Homebuyers an Edge,
About.com
HOPE NOW -
(888)
995-HOPE (4673) - a HUD-approved alliance
that provides free foreclosure prevention
assistance.
How
You Can Avoid Foreclosure and Keep Your
Home, from HUD
HOPE
for Homeowners program, which allows
distressed borrowers to refinance into
affordable, government-back mortgages.
Consumer
Alert from DOBI
Credit
Repair: How to Help Yourself from the
Federal Trade Commission
New Jersey Foreclosure Mediation from the Administrative Office of the Courts
Foreclosure
Resources from the Federal Reserve
My
Money, My Home, My Future toolkit from HUD
to help "get your financial house in order."
NJ
Home Ownership Preservation Effort
