Short Sales - Q & A
| Q: |
Can a home seller sell a home for
less than its mortgage? |
| A: |
This situation is known
as a "short sale." Sometimes home owners
can negotiate with lenders and have them split the
difference between the sale price and loan amount,
which still must be paid.
A short sale may be complicated if the loan has
been sold to the secondary market because then the
lender will have to get permission from Fannie Mae
or Freddie Mac, the two major secondary-market players.
If the loan was a low-down-payment mortgage with
private mortgage insurance, then the lender also
must involve the mortgage insurance company that
insured the low-down loan.
Resources:
* "How to Fight Foreclosure," Jeff Jensen,
Jensen Publications, 200 Main Street, Suite 104-201,
Huntington Beach, CA 92648; (714) 843-0321.
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| Q: |
How does someone sell a slow mover? |
| A: |
Even in a down market,
real estate experts say that price and condition are
the two most important factors in selling a home.
The first step is to lower the price. Also, go
through the house and see if there are cosmetic
defects that you missed and can be repaired.
Secondly, home sellers should make sure that the
home is getting the exposure it deserves through
open houses, broker open houses, advertising, good
signage and a listing on the multiple listing service
(MLS).
Another option is to pull the home off the market
and wait for the market to improve.
Finally, frustrated sellers who have no equity
and are forced to sell because of a divorce or financial
considerations could discuss a short sale or a deed
in lieu of a foreclosure with the mortgage lender.
A short sale is when the seller finds a buyer for
a price that is below the mortgage amount and negotiates
the difference with the lender.
In a deed-in-lieu-of-foreclosure situation, the
lender agrees to take the house back without instituting
foreclosure proceedings. But these would be considered
more radical options than lowering the price.
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| Q: |
How does a home go into foreclosure? |
| A: |
Foreclosure proceedings
usually begin after a borrower has skipped three mortgage
payments. The lender will record a notice of default
against the property. Unless the debt is satisfied,
the lender will foreclose on the mortgage and proceed
to set up a trustee sale. |
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| Q: |
When does foreclosure begin? |
| A: |
Lenders will initiate
foreclosure proceedings when homeowners become delinquent
in their mortgage obligations, usually after three
payments are missed. The lender will then notify the
buyer in writing that he or she is in default. The
lender can request a trustee's sale or a judicial
foreclosure, in which the property is sold at public
auction.
A borrower can cure the default by paying the overdue
amount and the pending payment after the notice
of default is recorded, usually no later than a
few days before the property's sale.
Some sales allow the successful bidder to take
possession immediately. If the former owner refuses
to vacate the premises, the court can issue an unlawful
detainer that allows the sheriff to come out and
evict them.
Borrowers should do everything they can to avoid
foreclosure, which is one of the most damaging events
that can occur in an individual's credit history.
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| Q: |
How long do bankruptcies and foreclosures
stay on a credit report? |
| A: |
Bankruptcies and foreclosures
can remain on a credit report for seven to 10 years.
Some lenders will consider an borrower earlier
if they have reestablished good credit. The circumstances
surrounding the bankruptcy can also influence a
lender's decision. For example, if you went through
a bankruptcy because your employer had financial
difficulties, a lender may be more sympathetic.
If, however, you went through bankruptcy because
you overextended personal credit lines and lived
beyond your means, the lender probably will be less
inclined to be flexible.
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Copyright 1999 Inman News Features
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