Introducing: A Simple Guide to Short Sale and Foreclosure- PART 1
Photo courtesy of Farl
Foreclosure
Homeowners Predicament:
- Ruined Credit
- May end up owing after the foreclosure
- Collectors chasing: Judgements & garnishments
- Shame
Solution
Short Sale
- Avoids some of the problems listed previously
- Creditors get more of their principal sooner
- Short Sale has the same time frames as an ordinary sale- easier exit.
Short Sales
What is a short sale?
- A short sale is the sale of a property, for less than what is owed, by obtaining permission from all the secured creditors to do so.
Who takes short sales?
- Any creditor, secured by collateralized real estate,whose equity position in the property is compromised.
Parties involved in a Short Sale
- Homeowners- provide copies of notes, prepayments & loan balances.
- Listing Agent- letter of authorization signed.
- Loss Mitigation Officer
- Trustee
- Additional Lien Holders
- Title Company
- Appraiser or BPO from Realtor
Difference Between Short Sale vs. Release of Lien
- In a short sale the creditor settles in full the amount owed by the debtor for a value that is less than what the creditor is owed. The remaining balance is forgiven. The homeowner no longer owes anything to the creditor.
- In a release of lien, the creditor removes its security interest in the property but the amount owed is not forgiven. The homeowner still owes a balance to the creditor.
Short Sale vs. Release of Lien
- A creditor that authorizes a short sale will issue a settlement letter stating that the debt is settled in full for a specified amount.
- A creditor that releases a lien will, prior to releasing the lien, make the homeowner sign a new promissory note, not secured by a trust deed on the property, stating the value of the debt and the terms of payment/
- Listing agent keeps Seller informed w/ documentation as to what could happen, including foreclosure.
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