Short Sale Information for Jacksonville Home Owners
Short Sale by Definition: Selling a house for less than is owed on the mortgage or combined mortgages with the Bank’s Approval.
To Short Sale or Not to Short Sale? Read this Article from the Wall Street Journal
Underwater on your mortgage or just can’t pay? Know your options:
- Understand loan modifications: If you are barely underwater on your home, this route may work, if you are 20% or more upside down, go directly to a Short Sale. Banks are NOT willing to do “principal reductions”, principal is the amount you owe. However, they may be willing to reduce your interest rate in order to get a lower payment. BE CAREFUL: think smart about your financial future on modifying a loan on a home that is worth considerably less. UPDATE: Only a very small percentage actually get a permanent modification and 60-75% end up defaulting again! ALSO: 70% of modifications end up with a HIGHER monthly mortgage payment than before. Go to step 2. Read the latest HAMP issues here.
- Short Sale: When a loan modification won’t work or you just need to get out of the house all together, do a short sale. The short sale process takes a lot of time, its not fast as the home still has to sell in this Buyer’s Market. You will need a very good REALTOR who has specialized knowledge and processes needed to complete short sales. (We have a team of professionals that specialize in doing short sales – The team includes a local Jacksonville short sale attorney’s office that negotiates with the bank on your behalf). Meet Brad – It’s time to get the process started.
- Deed in Lieu of Foreclosure: If you just can’t sell the house or condo, offer to deed the house back to the bank. This is your last, best bet before a Foreclosure. The bank may not want it and instead want you to continue trying to Short Sale. I’ve had several customers who have attempted to deed back to the bank and the bank just responded with “Lower the price another $10,000 and call us back in 60 days”. We did, and the bank gave us the same response again. They don’t want it and would rather you short sale. This will hit your credit harder than a Short Sale.
- Foreclosure: At some point of not making payments long enough and not getting a purchase and sale agreement on the home, the bank will probably decide to move forward with their right to legally take the home back through a Foreclosure. If you get “served” papers, you still have time to sell the home…maybe even another 12 months as the courts are so backed up with Foreclosures in Florida. However, you shouldn’t walk away or wait any longer to get the home on the market. The quicker we can get involved and get the home under contract with a new buyer, the faster we can stall a Foreclosure by completing a Fast short sale.
Qualify for a Short Sale
Banks aren’t willing to take a loss on their investment unless you have a true hardship and you qualify for relief. What will qualify you for a short sale, answer yes to all of these four questions or you may not qualify for a Short Sale in Jacksonville Florida.
- The Homes Market Value has Dropped: The home is worth less than the unpaid balance of the mortgage. The only way to know this is to look at the recent closed transactions of properties around your home. Recent is within the last 6 months. A true value is only determined by what someone else is willing to pay for the home, however a licensed appraiser can give you a good determination of value.
- In Default or Near Default: Lenders are all over the board on this one. Some require you to be late on payments, some don’t care, and some will tell you something different every day that you call. The bottom line, if you can’t pay you can’t pay. If you can pay and it’s very tight, it’s your own personal decision to keep paying or to stop paying the mortgage. Ask our Attorney his legal opinion on this issue.
- Seller has no Assets: Rarely will a bank allow you to short sale and the bank take a loss on the investment if you have a load of cash sitting in the bank. Clarification: If you have a million in retirement funds, not to worry , but if you have $50k+ sitting in the bank? They could ask for some of that cash to cover the difference. $10k in the bank? $10k is living expenses, just in case money, emergency money – Much more likely to hear your hardship situation and not want any of that money.
- Seller Hardship: The Seller must have a true hardship. The banks want this in a letter and you need to be legitimate and truthful.
Examples of a Hardship:
The following is a non-exclusive list of hardships that a Lender or Lien holder may take into account when deciding whether to accept a short sale:
- Unemployment or Loss of Income or Reduction of Income
- Divorce or Separation
- Medical Emergency / Sudden Illness
- Bankruptcy
- Death of Spouse or Death of Co-borrower
- Short or Long Term Disability
- Adjustable Rate Mortgage Reset
- Failed business
- Job Relocation
- Military Duty
- Medical bills
A few examples that DO NOT constitute a hardship:
- Bad money management
- Unhappy with neighbors or unhappy with your house
- Buying another home
- Pregnancy is not considered a hardship
- Moving just because is not a hardship
The bank will ask for these documents in a Short Sale Package:
- Hardship Letter
- 2 Most recent bank statements
- Recent pay stubs
- Listing Agreement with a real estate office
- HUD-1 Net sheet
- 6 month profit and loss statement – or something that will show your expenses
The bank needs the above items to verify your position of needing relief. As it turns out, it is harder to get out of a mortgage than it was to get into one! Don’t get frustrated, just remember there is a good amount of paperwork push involved and the attorneys office can help you with this.
Steps to Short Sale your Jacksonville, FL Home:
- Contact Brad: I can answer many questions regarding the process. We, RE/MAX, fill out the listing agreement with you, the Seller. I give you the list of what is needed for the short sale and you start getting together the paperwork
- Meet at Attorney’s office: We meet at the attorney’s office so you know who will be working on the bank’s approval. Hand in your paperwork to the attorney team. The attorneys fees are minimal and usually less than $500 paid by you upfront, the Seller, and the remainder of the attorney’s fees are paid from the proceeds of the sale…..not from your pocket. The upfront fees are dependent on who your bank is, the number of loans/mortgages on the home, and the complexity of your sale.
- Marketing the Property: We start marketing the property for sale. This period will take time even with a low price. Keep the home looking incredible and the yard in top shape for curb appeal. We are competing to sell the home against all the other short sales and bank owned homes so it’s important to understand that we still must attract a buyer.
- Under Contract: We get an offer that is realistic that we believe the bank will consider: We sign off with an addendum stating that the offer is contingent to the lien holders approval.
- TIME: It takes months for the offer to get approved and closed. Bank of America (Countrywide) has been the slowest however they now have a new system called EQUATOR that smooths out the process. Most banks are hitting 60 days or more to give us an Approval and Clear to Close letter. Don’t try to reason as to why yours should/will close faster…..It won’t. Banks are flooded with short sale contracts and are struggling to handle the volume.
- Closing: We finally got the approval, we are now at the closing table. The closing happens and you walk away with nothing from the sale. All fees, realtor fees, attorney fees, closing fees, etc are paid from the proceeds of the sale. What is left over is given to your lien holders.
Deficiency Judgment:
What is a Deficiency Judgment? This is the legal ability of a bank to get a judgment against you for the difference of what is owed and what the home is sold for. They can issue you one at closing or after closing. Will they, no one really knows other than the lender. I directly ask the bank negotiators if they issue a deficiency judgment and some will come right out and tell you “NO”. Others will tell you that they do have the legal ability to do it if they choose. What are the chances of getting a deficiency judgment? If you got one, you would be the only person I would know that has received one – Not to say that it couldn’t happen in the future. Talk to our Attorney about the time period that you have to be worried about, the “Statute of Limitations”. By the way, it’s different in EVERY State so beware what advice you are reading.
Choosing a Real Estate Agent to do your Short Sale
How to choose the right real estate agent for your short sale? Don’t choose your best buddy, don’t choose your mom’s friend, don’t choose anyone unless they have a TEAM of professionals that can complete the process and the sale. BEWARE! Most REALTORS do not want to do short sales. Most haven’t done a short sale and have no idea how to go about it other than what they have “heard”. From my experience, it takes time, persistence, and a large amount of specialized knowledge to make it all work. I did my first short sale in 2006 and have since put together a short sale team including a local attorney’s office who works on your behalf to negotiate with the bank. We keep up with the ever changing world of Short Sales and keep perfecting our processes to better complete each sale. This cost you nothing and should give you ultimate peace of mind knowing you have a competent and professional team working on your behalf. Contact The Brad Officer Real Estate Team.
Buying another home
Can you buy another home after a Short Sale? Yes, just not right now – more than likely. Regardless of your situation, the bank has to approve you out of the loan. If they let you out, it will probably be hard to get back in for the short time being. Look to purchase again in 12 to 18 months. I’ve heard of much sooner and I’ve heard 24 months, but most lenders will consider you eligible again in about 12 + months. Keep paying your bills on time, save some cash in the time being, and you will greatly increase your odds. Not much has changed, they look at credit scores, debt to income ratios, and down payments.
Where to Live after a Short Sale
There are more houses than ever available for rent in Jacksonville and the surrounding areas. Many are vacant and never lived in. Many people I have worked with in the past end up in nicer houses that the ones they sold….for less money. Fairly easy to start the search, and you may consider looking on Craigslist.com. Keep your budget in check and don’t be scared to negotiate the right rental terms. Save some cash, keep paying your bills on time, pay down any other debts, and get ready to buy a home at today’s market value!
Credit Hit with a Short Sale
Will your credit be affected by a Short Sale? Yes, absolutely. You can’t get out that easily. Stop paying the mortgage = negative credit hit. Short Sale = negative credit hit. No way around it, but if you are reading this, you probably could care less at this point. The good news, your credit will bounce back if you keep paying all your other bills and debts on time.
Your Cost for doing a Short Sale
You, the Seller, have only one true out of pocket expense: the Attorney’s minimal upfront fee. The REALTOR fees, closing fees, majority of attorney fees, etc are all paid out of the proceeds from the sale. More than one loan….All lien holders agree to take a portion of the proceeds after expenses. You can’t pay anything towards the closing of the home or the repairs of the home. Likewise, you can’t receive anything from the sale regardless of how much money you poured into the house.
Will your neighbors know you are doing a Short Sale
Yes. Almost impossible to keep it hidden as anyone with a brain can figure it out. Realistically, many of your neighbors are most likely considering doing the same if they are upside down in the value of their homes. Also, it is noted in the MLS (Multiple Listing Service) that the sale is a Short Sale so every REALTOR and every potential buyer will know…..which ultimately will attract more buyers as they know they can buy the home for today’s values.
Short Sale TIP: Don’t wait! If you think you are in the position of needing to short sale your home, call us immediately and we can set up a free consultation at the attorney’s office. If you wait and think the problem will go away, you may find yourself months down the road and facing Foreclosure.
Contact The Brad Officer RE/MAX Specialists Team
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