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Broker/ Owner of North Star Realty. Besides being hardworking, creative, honest and committed he is also extremely knowledgeable!

What is a short sale?

A short sale is the sale of a property for less than what is owed to the bank, or mortgage companies. Taking a lesser payoff for the total owed requires permission from all lien holders. A process of reviewing the personal finances of the borrower, an assesment of value of the property derived through comparisons of like properties, and the active marketing of the property through an MLS system are usually required before a bank or mortgage company will allow a short sale.

For example, if you owe $115,000 on your home and the market value of the home is only $105,000, your bank(s) may decide to accept the $105,000 as payment in full. This would be considered a short sale because the bank(s) is/are accepting a short payoff on the loan.

hy should I attempt a short sale?

A short sale is valuable because it could save you from needing to file a bankruptcy, or having a foreclosure and subsequent credit problems. If the bank(s) and lien holders agree to a short sale of your home, they could agree to do the sale and release your debt as paid in full.

Does it make a difference what type of loan I have on the home?

It can, if it is a Freddie Mac or Fannie Mae or HUD, They may have mortgage insurance to help the bank with their losses. In some cases they have been willing to give the seller $1000 to help with moving expenses as long as there are no liens. If there are liens they will allow your $1,000 seller incentive to go to any of the liens. This is what I negotiate with the banks. If it is a conventional loan the negotiating process is the same but the out come could be much different. The Banks take each sale on a case-by-case basis.

How long do I have to reinstate my loan?

Generally, banks will allow you ninety (90) days from the time you are found in default or from the notice of default to reinstate your loan. But they will generally not reinstate until your loan is brought current. This can be done in a partial payment and by the bank making payment arrangements on the remaining amount or all at once. This is called a work out or a reinstatement and must be worked out and applied for. They will want to see a financial statement showing you have the ability to make their arrangements.

How long does it take the bank to foreclose on a home?

In Utah, once you are 90 days late the bank files a Notice of Default (which generally happens around 90 days after you have stopped making payments) you have another 90 days to reinstate the loan or the bank will file a notice of trustee sale. This is posted on the door and sent in a certified letter telling you the home will be going to auction on a cretin day and time at the county court house steps. They then will post the sale in the local paper for 3 weeks for public notice. Then on the day of the sale, they will sell it to the highest bidder. Most of the time that will be the bank.

What will doing a short sale cost me?

Most likely, it won't cost you anything. In a short sale situation, the bank will pay the real estate fees and will often take care of some of the outstanding liens on the property (including taxes). So in most cases, a short sale is completely free to the seller.

Who will pay the real-estate fees?

The first mortgage company (the bank foreclosing on the property) generally pays the real estate fees in a short sale situation. Doing a short sale will save the bank a lot of money.

How long will the short sale take?

This is a tough question. The average short sale takes around four months to complete. However, I have seen them take as long as a year! It just depends on the situation, how cooperative the banks are, liens on the property, mortgage insurance, and many other factors.

Can I buy my own home back in a short sale?

Most banks will not allow this to happen. They figure that if you can afford the home you would not have let it go into foreclosure.

How did I get in this position to owe more than the home is worth?

The banks will always loan more money that the home is worth because they know it’s not going any where and that you won’t want the bank to take it from you. Some times like our market today, the market is dropping.

Why do a short sale instead of just letting the bank foreclose

What many people don't understand about foreclosures is that they are actually worse than a bankruptcy on a credit record. With a foreclosure on your record, you could have severe difficulty buying another home for as long as seven to ten years! A foreclosure is the "kiss of death" so to speak.

When the bank starts foreclosing on my home, what are my options?

You have a few options. First, start making mortgage payments again and reinstate the loan. You might be able to get the bank to work things out with you (with their appropriately named Workout Department) and help you get back on your feet again.

Another option is to find a short-sale-experienced real estate agent who can try to work out the details of a short sale with your mortgage company. If you can't reinstate the loan, then this is your smartest option.

Many people believe that filing bankruptcy will solve all their problems when they are in default. Yes, bankruptcy can alleviate the need to continue to pay off your home. However, the bank will still foreclose on your home and the foreclosure will still end up on your record and ruin your credit even if you file for bankruptcy. This is what most people don't realize. When it comes to your mortgage, bankruptcy won't save you from being foreclosed on and having your credit ruined.

Technically, your third option is to do nothing and let the bank foreclose, but this is not recommended as nothing good can come of it.