Short Sale Information For North County San Diego Homeowners
Short Sale Definition
Short sales are defined as the sale of your North County San Diego home for less than what you currently owe the bank. Generally before you can sell your home you have to pay off any existing mortgages (loans) and liens (taxes and HOA fees, for example). In a short sale the bank agrees to let you sell your home for less than the loan amount owed to them, and generally will pay off for you any existing liens or taxes.
Why Do Short Sales Happen?
The need for banks to consider allowing you to do a short sale originated many years ago, but in today’s housing market the explanation is really quite simple. If you purchased your home with a loan, and the value of your home dropped precipitously in the past couple of years (sound familiar?), then you may find yourself in a position where you can no longer make the payments. This would be the kind of thing that happens if you had to move, lost your job, or had any kind of change in your financial condition. Other folks have simply given up on wanting to continue to pay their mortgage on a home that is perhaps worth 40% of what they payed for it. In this case, although capable of making payments, the homeowner simply wants out. This is often called a strategic “default” by the banks, and while they don’t like this practice, it has become widespread among homeowners in San Diego and other areas of the country.
Can I Do A Short Sale?
Who Qualifies for a Short Sale?
Qualifying for a short sale is complicated, with each bank having their own rules and regulations. If you want to do a short sale successfully you’re going to have to work with a short sale real estate expert like Don Reedy to make sure you’re following the rules and procedures your particular bank require. In general you’re going to have to list your home with a short sale expert first, prepare a short sale package (more on that later), get an accepted offer on your home, and then submit the offer to the bank for their approval. After the bank sees the offer you’ll either have it accepted or “countered.” If the bank feels the offer is too low, for example, they will send out their own appraiser and arrive at a price they feel is acceptable. Generally if you’ve listed your home with an experienced short sale real estate agent like Don Reedy you’ll have an offer that really is at market value, and that with a little negotiating and communicating with the bank will result in an approved sale.
Short Sale Issues or Potential Problems
What problems do homeowners have while trying to sell their home with a short sale? Here’s a couple of issues or problems that often come up. These problems are almost always avoidable or able to be worked around, but you’re going to need a good short sale specialist to help out.
One of the biggest problems is pricing. Yes, you love your home. You’ve put in sweat equity, maybe money, and even with that you’ve been told that your $500,000 home is now worth $350,000. It hurts. So perhaps you want to price you home closer to $500,000….just because you think that’s its value. This, of course, is a major mistake. Experienced short sale Realtors like Don Reedy will do a comparative market analysis of your home, comparing your home to others in the neighborhood that have sold. This number, high, low or in the middle, is what the appraisers and banks will work from. No one, you see, can get a loan on a home if it’s priced higher than its appraised value. So if you price the home correctly, then once you get a buyer who wants your home, the bank will usually approve your short sale….and you can now move on without your current loan hanging over your head.
Another frequent problem is not being willing to jump through the hoops your bank will almost certainly require of you. You’ll have to prepare a lengthy short sale package, a bundle of documents that usually include a hardship letter, bank statements, tax returns, etc. For some homeowners this adds an additional layer of stress to an otherwise stressful situation. Again, if you work with me, I’ll help you through this difficult stage.
Consequences of a Short Sale on Credit
This is the $64,000 questions, isn’t it? Should I go through the Short Sale process, endure some paperwork and the listing process, in hopes that afterwards I’ll be rewarded for being the best citizen I can be?
Turns out the answer seems to be one I personally hate….”It Depends.”
Take a look at the chart below to get an idea of how your FICO score MIGHT be impacted by a short sale. Remember, every situation and homeowner are different. Some have good jobs…others not. Some have plenty of income….others not. Some will benefit from a bank not reporting the short sale deficiency….most will not. In other words, short sales are still a contractual situation where you’re abandoning your promise to pay and giving back your collateral (your home) in exchange.
The Next Step in YOUR Short Sale Process
Your next step in the short sale process is to contact Don Reedy to make an appointment to meet and talk about your home and your loan specifically. I can guarantee you that you’ll be much happier once we’ve talked….no matter what direction you go. There are other ideas for solving your financial issues on your home, ideas about foreclosures, deeds in lieu, renting out your current home, “bail and buy”, etc. So your next step is to contact us so you can be the best consumer you can be, and get the best result you can get from the sale of your home.