What is a Short Sale and How Does it DIffer from a Foreclosure?

A Short Sale, also known as a pre-foreclosure sale, is when a home is sold for less than the balance remaining on the mortgage. If the mortgage company agrees to a Short Sale, whatever the home is sold for is what you pay to the bank/mortgage holder, and it is considered paid. Not every property qualifies to be listed as a potential short sale by a bank. The bank that carries your mortgage must agree to grant a short sale and there are several factors that qualify a homeowner to be eligible for a short sale. The homeowner does not need to be in all of the situations described below, just one, although, being under more than one of these conditions makes it easier to qualify for a short sale.
• The homeowner is ineligible to refinance or modify their mortgage
• The homeowner is facing a long-term hardship
• The homeowner is behind on your mortgage payments
• The homeowner owes more on their home than it’s worth
• The homeowner is has not been able to sell their home at a price that covers what they still owe on their mortgage
• The homeowner can no longer afford their home and are ready or need to leave

What Role Does New Foundation Homes Play in a Short Sale?
The owners of New Foundation Homes are also certified Realtors® who specialize in short sales. Many real estate agents have not had the proper training on how to successfully negotiate and follow through with short sales, so many put homes on the market that will never close as a short sale., because the agents do not qualify the sellers first. Some agents place unrealistic price tags on the short sale, which the bank will never accept. It is best to choose an experienced short sale agent, such as New Foundation Homes, who have closed dozens of short sales. A real estate agent specializing in short sales will:
• Determine the type of short sale. There are many types of short sales, from Fannie Mae HAFAsto regular, non-GSE HAFAsto a traditional short sale, and a few more in between.
• Gather the required paperwork and submit the short sale package to the homeowner’s bank who holds the mortage.
• Help the seller to accurately price the short sale home. The price needs to be attractive enough to entice a buyer to wait for short sale approval but high enough to satisfy the bank’s needs.
• Put the home on the market and market the property like they would any other home.
• Negotiate the short sale with the bank on behalf of the seller.
• Submit the short sale approval letter to the seller. Most sellers want a release of liability and no deficiency to do a short sale.
•
There are several benefits for doing a short sale in comparison to a froeclosure:
• The homeowner is in control of the sale, not the bank.
• The homeowner is may sleep better at night knowing who is buying their home.
• The homeowner is will spare themselves the social stigma of having gone through a foreclosure.
• The homeowner is can be current on their payments and still effect a short sale.
• The home sale will be handled like any other home sale.

Buying Again After a Short Sale vs Foreclosure
Buying a home after a short sale is much easier that trying to purchase a home after a foreclosure. If the mortgage payments never felon behind 30 days late and the lender does not require that the homeowner pay back the loan, Fannie Mae guidelines may allow the homeowner to buy another home immediately, however finding a lender who will fund that kind of loan is very difficult and some lender requirements can be strange and very inconvenient, such as having to move more than 600 miles away.
If the payments have been late or not made for several months and the homeowner is still granted a short sale, they may still qualify to buy another home with a Fannie-Mae backed mortgage within two years of the short sale. The wait for FHA is about 3 years.
After having gone through a foreclosure, it is nearly impossible to go out a purchase another home right away. It is likely that the homeowner may be eligible to buy another home in 5 years if the home that was foreclosed on was their primary residence. Without restrictions from the lenders, the wait is usually around 7 years.
Affects on Credit After a Short Sale vs a Foreclosure
A short sale may be considered to be a derogatory mark on your credit even though credit bureaus do not show the word “short sale” on your credit report. All lenders report short sales differently, some saying “paid in full for less than agreed” or “settled for less,” among other phrases, and some report the short sale as a charge off. Some clients have reported negative FICO score drops from 50 points to 130 points. Major point drops are typically due to being in default, meaning the homeowner has fallen behind on their payments.
After a foreclosure, however, most FICO scores drop a minimum of 100 points, and can usually fall up to 200 points after a foreclosure. The foreclosure stays on your credit history for 7 years. Another negative about a foreclosure is that if a prospective employer runs a credit check on you, your job application may be denied if you have a foreclosure on your record.