What Is A Short-Sale And Short-Sale Mortgage Guidelines

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This Article On What Is A Short-Sale And Short-Sale Mortgage Guidelines Was Written By Julie Hayward

What Is A Short-Sale And Short-Sale Mortgage Guidelines
Gustan Cho Associates

Below are questions and answers on the topic of What Is A Short-Sale with Julie Hayward:

I am behind on my mortgage and unable to catch up? What can I do?

  • You could ultimately continue not to pay and the property will go into foreclosure
  • The bank will serve you notice and the auction is scheduled
  • Once the property is sold at auction you will have approximately 45-90 days to vacate the property

Obtaining Short-Sale Approval When Not Behind On Mortgage Payments

Obtaining Short-Sale Approval When Not Behind On Mortgage Payments
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I am not behind on my mortgage yet and can’t afford to keep the property. However, what I owe is more than the property is worth. Should I consider a short sale?

The benefit to a short sale instead of foreclosure is it is better on your credit and gives you more time in the home.

  • As long as you have a contract on the property, in most cases, the lender will not schedule an auction since they are working on negotiating the transaction with a current buyer
  • This takes time, usually longer than 45-90 days and in some cases up to two years
  • There are several reasons for this
  • Some buyers get tired of waiting during the approval period
  • Some buyers think they can find a steal and when the bank comes back with a counter-offer they dislike, they walk

Sometimes there the lender has a lot of inventory in a particular area and is not adequately staffed to meet the demand. So the files sit on a desk until someone gets to them. There are more reasons but these are the most common reasons for a delay

Buying Another Property After A Short-Sale

Buying Another Property After A Short-Sale
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Also, you can buy another property sooner with a short sale and/or deed in lieu of foreclosure with a conventional loan.

  • The waiting period after a deed in lieu of foreclosure and/or short sale, the waiting period is 4 years versus 7 years waiting period after a foreclosure to qualify for a Conventional Loan
  • To qualify for a Conventional Loan after a foreclosure, there is a seven-year waiting period after the recorded date of the foreclosure
  • Throwing thousands of hard-earned dollars away in rent and higher interest rates when you do decide to buy
  • Not to mention lost equity over time
  • Often the lender offers a seller’s moving credit which can be up to $10,000 and yes, we have gotten this amount for several sellers

Some of those people decided to take the $10,000 and start over.

  • After they can to terms with the situation, they usually ended up in nicer, more affordable homes and some were even closer to work!
  • After it was all over, they were happy and could start the rebuilding process

When Should A Short Sale Homeowner Stop Making Payments?

When Should A Short Sale Homeowner Stop Making Payments?
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I have decided to do a short sale, when should I stop paying my mortgage?

That depends, if your credit is already pretty low, and you cannot afford to pay it may make sense for you to stop paying.

  • If your credit isn’t bad and you can afford to pay, you may want to continue to pay for any additional late payments reflect poorly on credit

How Does Short-Sale Affect Credit

How Does Short-Sale Affect Credit
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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
  • Fannie Mae recently changed their guidelines and increased their mandatory waiting period after bankruptcy and short sales from 2 to 4 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

This will bring your credit score up so you can qualify for a mortgage in that 3 year time period with an FHA Loan and 4 years with a Conventional Loan.

Short-Sale Process And Key Players

Short-Sale Process And Key Players
Gustan Cho Associates

Do I need to contact my lender?

No, you do not have to contact them if you have hired a real estate agent and attorney.

  • They should handle that for you
  • You will give them the authorization to speak to them and negotiate on your behalf
  • If you decide to go it alone, you will need to contact them 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

Plus, the bank pays their fees, so they handle a majority of the work allowing you to not stress out and focus on other things.

Contact With Lender During Short-Sale Process

Contact With Lender During Short-Sale Process
Gustan Cho Associates

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

The auction will proceed as scheduled.

Listing Short-Sale Home In The Market

Listing Short-Sale Home In The Market
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After I decide to do a short sale, how soon should I put my house on the market?

  • 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 the auction, the sale cannot be stopped unless you declare bankruptcy
  • Putting the house on the market and finding a buyer takes time
  • Depending on the market and time of year, this can take several months
  • Documents need to be signed to list the property, pictures taken, signs placed in the yard (although this can be optional), an offer signed by both parties and submitted by the bank with all required bank documents

Some documents 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.

Timeline In Getting Seller’s Moving Credit

Timeline In Getting Seller's Moving Credit
Gustan Cho Associates

How soon do I get the seller’s moving credit?

  • You will receive the moving credit at closing

Privacy And Rights Of Short-Sale Homeowners

Privacy And Rights Of Short-Sale Homeowners
Gustan Cho Associates

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 yet 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

How Long Can Short-Sale Homeowners Occupy The Home After Executed Sales Contract

How Long Can Short-Sale Homeowners Occupy The Home After Executed Sales Contract
Gustan Cho Associates

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 you need to close by 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

Responsibility To Homeowners Association

Responsibility To Homeowners Association
Gustan Cho Associates

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 associations may be able to take possession of the property and then sue you for back assessments plus damages

Maintenance Responsibilities

Maintenance Responsibilities
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If I own a home, 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

What To Expect During Short-Sale Process

What To Expect During Short-Sale Process
Gustan Cho Associates

What is the process and what can I expect?

  • After all the 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 and you do not have to continue to show the property

Ordering A Home Appraisal

Ordering A Home Appraisal
Gustan Cho Associates

During that time, the buyer may want to do an inspection and an appraisal by the bank will be done.

  • After that, the bank will usually give a counter-offer 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 Of What Is A Short Sale: Chicagoland Realtor Julie Hayward

The author of this article on “What Is A Short Sale” is Julie Hayward.  Julie Hayward recently interviewed Gustan Cho on her write-up on 11 FAQ And Answers By First Time Home Buyers which is now live on our website. Julie Hayward is one of the top realtors in the state of Illinois and the team leader at Keller Williams, one of Chicago Area’s fastest growing real estate firms. Most top producing mortgage loan officers know Julie Hayward and The Julie Hayward Team is the real estate company of choice for their pre-approved borrowers. Julie is also a guest writer and associate contributing editor for Gustan Cho Associates Mortgage Resource Center.

Julie is in the process of publishing her first book which will be released shortly. Julie’s business partner is prominent Chicago attorney Chad M. Hayward who is the President of The Law Offices Of Chad M. Hayward. Attorney Chad Hayward is also a licensed Illinois real estate broker and a licensed mortgage loan originator and one of the most, if not the top experienced and talented bankruptcy attorney in the state of Illinois. Chad Hayward is also a guest writer for Gustan Cho Associates Mortgage Resource Center and is a consultant to all of our licensed mortgage loan officers at Gustan Cho Associates. Julie can be contacted at 312-504-9228 or you can email Julie Hayward at juliehayward04@gmail.com.  Gustan Cho Associates Mortgage Information Center is honored to have such a talented individual like Julie Hayward represent us and be a regular guest writer for our viewers.

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