Today marks the first of our 6 part series on Short Sales.
We sat down with Vince Milito, a Short Sale Specialist with Jameson Real Estate, and the President of MRG Negotiators, Inc. He has been selling residential real estate since 1996 and has specialized in short sales since 2008.
Q: Do you need to default on a payment before doing a short sale?
A: Most clients I meet with have already fallen behind in their payments but you are not required to default on a payment prior to doing a short sale. However, I've been told by some clients that banks have been very slow to work with performing notes. I would never advise someone to stop paying if they can afford to do so. You should carefully weigh your options and also discuss with an attorney.
Q: How long do sellers have after defaulting to do a short sale?
A: You can submit a short sale up until the foreclosure sale date. At that point it would no longer qualify for a short sale. But you should pursue a short sale well in advance of any foreclosure sale date and call your trusted real estate advisor as soon as you know you're headed for a potential problem.
Q: How does a short sale affect a sellers credit?
A: While there is no hard and fast rule
for how your credit will be affected it is generally believed to affect
your credit score by 100-150 points. Each situation is different
however and there are other factors that can also hurt your credit. Are
you paying everything else? How many payments have you missed? So use
100-150 points as a guideline with the understanding it could be worse
but it is still much better than a foreclosure which could be 300 points
Q: Let's Talk About After The Closing. What liabilities can be expected?
A: The bank will pay and settle any outstanding debt associated with the
property in order to get clear title for the new purchaser. Have your
attorney review your short sale "approval letter" to make certain you
are not liable for any future collection.
The Condoist Says:
Agreed, pay your mortgage if you can. If you're home value is underwater
(i.e. you purchased in 2005 or 2006...) and you want/need to move, a
short sale is an option worth considering. Know the impact it may have
on your credit and weigh your options. While Milito is right (keep
paying if you can) very few banks are willing to work aggressively with
sellers until they've begun to default. Play your cards carefully.