Short Sale Process
This Informative Article On The Short Sale Process Was Written By Julie Hayward
Gustan Cho Associates would like to thank Julie Hayward, President and Managing Broker of Chicago Based Edge Realty LLC for publishing this Question and Answer BLOG on the Short Sale Process. Julie Hayward is also partners with her attorney husband at The Law Offices of Chad Hayward. Hayward Law Offices is a full service law firm with special emphasis in real estate and bankruptcy law and has law offices throughout Northern Illinois. Julie is an expert in the short sale process. Julie Hayward has represented countless of homeowners through the short sale process in the following Chicago counties:
- Cook County
- Lake County
- Will County
- Kane County
- McHenry County
- DuPage County
Most Frequently Asked Questions On Short Sale Process
Here are most commonly asked questions about the short sale process:
- QUESTION;I have decided to do a short sale. When should I stop paying my mortgage?
- The answer to that depends on your current credit score. if your credit is already pretty low, and you cannot afford to pay the mortgage, it may make sense for you to stop paying immediately. If your credit isn’t bad, and you can afford to pay the mortgage, you may want to continue to pay, as any additional late payments reflect poorly on your credit.
- QUESTION; How does a short sale affect my credit?
- After the short sale is completed, it will show as “settled.” A short sale can impact your credit score up to 100 points or more. However, creditors look closely at the last two years, and you could qualify for a mortgage again soon. Fannie Mae recently changed their guidelines and decreased their mandatory waiting period after bankruptcy and short sales from four years to two years. It is important to rebuild your credit after the short sale by reducing your debt-to-credit ratio (creditors prefer 10% of debt-to-total-credit available) and making payments on time. These actions will bring your credit score up so you can qualify for a mortgage in that two year time period.
- QUESTION; Do I need to contact my lender?
- No, you do not have to contact your lender if you have hired a real estate agent and attorney. They should handle that for you. You will give them authorization to speak to them and negotiate on your behalf.
Going Through Short Sale Process Alone
If you decide to go it alone, you will need to contact the lender and provide all the necessary documents to the lender(s). However, I highly recommend the use of a professional with experience in this area. The transaction can be highly complex, especially if a homeowner’s association or liens are involved, and you will want someone to guide you through the process. Moreover, the bank pays their fees, so they handle a majority of the work, alleviating your stress and allowing you to focus on other things. Also , it will be done correctly with a professional’s help.
- QUESTION: What do I do with letters I receive in the mail from the lender—or an auction notice?
- Forward all letters to the agent and attorney. If you receive an auction letter, notify them immediately, especially if you do not yet have a contract on the house. I can’t stress this enough. If you do not, depending on where you are at in the process, there may not be enough time to submit all the paperwork and the auction will proceed as scheduled.
- QUESTION: After I decide to do a short sale, how soon should I put my house on the market?
- QUESTION: After you decide to proceed with the short sale, you want to put the house on the market as soon as possible if you are behind on your mortgage. Once you have missed three consecutive payments, the house could be scheduled for auction at any time. For most lenders, if you do not have a contract on the property 30 days prior to auction, the sale cannot be stopped unless you declare bankruptcy.
Listing Your Home On The Market During The Short Sale Process
Putting the house on the market and finding a buyer takes time. Depending on the market and time of year, this process can take several months. Documents need to be signed to list the property, pictures need to be taken, signs placed in the yard (although this can be optional), and an offer signed by both parties must be submitted by the bank with all required bank documents. Some mortgage documents required to process loan such as pay stubs from the seller or proof of funds from the buyer may need to be gathered, and all of that takes time.
- QUESTION: How soon do I get the seller’s moving credit?
- You will receive the moving credit at closing.
- QUESTION: I don’t want my neighbors to know I am doing a short sale. Do I have to have a sign in the yard?
- No sign is necessary, but it is helpful in finding a buyer. The only way the neighbors will know if it is a short sale is if they are actively looking for information on the property, or if you tell them.
- QUESTION:After we get a contract on the property, how soon do I have to move out?
- You can move out as soon as you’d like, but is not necessary until we have approval from the lender. At that time, the lender will give a deadline date by which you need to close, or you could forfeit the seller’s moving credit. You usually have an adequate amount of time, generally a month or two, to find a property.
- QUESTION: If I am a member of a homeowner’s or condo association, do I have to pay the assessments if I’m doing a short sale?
- Yes, continue to pay the assessments. If you don’t, the association may be able to take possession of the property and then sue you for back assessments plus damages.
- QUESTION: Am I responsible for lawn care?
- Yes, continue to cut the grass. If you don’t, you will receive a citation from the city and will have to pay fines.
- QUESTION: Take me through the whole short-sale selling process, through each step. What can I expect?
- After all paperwork is completed and submitted, the property can be listed. Once it’s listed, you will begin to receive showing requests. Do your best to accept them since the sooner we can show it, the sooner we can get a contract. Once a buyer submits an offer, you will accept the offer and it will go to the bank for approval. At this point, you do not have to continue to show the property.
During that time, the buyer may want to do an inspection and an appraisal by the bank will be done. After those are complete, the bank will usually give a counteroffer and negotiations will begin between the buyer and bank. After they have come to terms, if the buyer is financing, there is a waiting period when the loan is being approved. If for some reason the bank and buyer don’t come to terms, the buyer gets tired of waiting, or the buyer doesn’t get financing, the property goes back on the market and the process begins all over.
About The Author: Julie Hayward
Julie Hayward, author of this article on the Short Sale Process, is a guest writer for Gustan Cho Associates Mortgage and Real Estate Information Resource Center and one of the top real estate agents in the Chicagoland Area. Julie is also the President and Managing Broker of EDGE REALTY LLC, a prominent real estate firm headquartered in Chicago. Julie Hayward is the realtor of choice for many mortgage lenders in the Chicagoland Area and we are blessed and honored for Julie Hayward to be part of The Gustan Cho Team.