Panama City Short Sale Info

What is a Short Sale?

Foreclosures in Panama City, Florida are affecting families, communities, the housing market and the local economy. One option many troubled homeowners are taking to reduce penalties and avoid foreclosure is a short sale. The question is, what is a short sale?

A short sale is the sale of real estate in which the sale proceeds fall short of the loan balance or payoff. It’s an alternative many homeowners are taking to avoid foreclosure and default penalties.

In order for a short sale to take place the lender must agree to a payoff on the loan for less than the remaining balance. A lender will accept a short sale in order to avoid the cost of foreclosure and increase the amount they will receive on the outstanding loan balance. This process also protects property values in the community and helps the homeowner preserve a higher level of credit compared to foreclosure. In most instances, specific criteria must be met to qualify for a short sale: mortgage in or near default stage, homeowner can provide evidence of economic hardship, property has little or no equity.

A short sale occurs when a homeowner lists a property for sale for less than the remaining loan balance. Once the homeowner receives an offer they submit it to the mortgage lender along with a short sale package. Before a short sale can take place the mortgage lender must agree to a loan payoff for less than the remaining balance. Lenders

A short sale is a more complex than the average real estate transaction. In a normal transaction you have the home seller, their agent, the buyer and their agent and their lender. In addition to those parties a short sale also involves the seller’s loan servicer, junior lean holders, mortgage investors, and possibly mortgage insurers.

The process of completing a short sale can be difficult without help. Hiring a qualified REALTOR to act as liaison between all parties involved and guide you through is very important. You will want a REALTOR with experience to expedite the short sale transaction with your best interests in mind. A REALTOR that can help you close the transaction in a timely manner while avoid common mistakes. Homeowners should consult with a tax expert and obtain the services of an attorney to protect themselves from future claims by the lender.

What is the difference between a Short Sale and a Foreclosure?

Review the following comparisons between short sales and foreclosures for a better understanding of why short sales are a better option for most homeowners. While a short sale is a complicated process, the outcomes of your patience and diligence are worth it in the end! What are the implications to my credit score? What are the implications to my credit history? Who decides if my home should undergo a foreclosure or a short sale? How long will I have to wait to buy another home? What will be the effects on my future loans? Does it affect my employment opportunities? How does a short sale versus a foreclosure affect the deficiency judgment? What are the implications to my credit score? Following a successful short sale your mortgage will be reported on your credit score as either paid or negotiated, lowering your score as little as 50 points and affecting you for only 12 to 18 months. After a foreclosure, however, your credit score can lower as much as 300 and usually at a minimum of 250 points and affects your score for over three years.

What are the implications to my credit history?

A short sale is often reported as paid in full and is not as destructive to your credit history.  A foreclosure will remain on your credit history for 10 years or more and will remain as public record.

Who decides if my home should undergo a foreclosure or a short sale?

In both short sales and foreclosure, the decision is made by your mortgage lender. The most important aspects to getting a lender to agree to a short sale, and saving you the more damaging credit implications of a foreclosure, is to prove that you have no other way to pay the mortgage and that the amount received from a short sale is the fair price of the market. Lenders who believe they can receive more by taking possession of the home in a foreclosure and selling it themselves will not agree to a short sale.

How long will I have to wait to buy another home?

Most mortgage lenders report that for homeowners who have undergone a previous short sale they may get a reasonable interest rate in less than two years. Fannie Mae guidelines allow a short seller to apply for a new loan immediately if payments were kept current and had no 60-day late payments on their record.

What will be the effects on my future loans?

For most mortgage lenders you will not be asked to declare or be questioned regarding a short sale on any standard loan application (1003). In regards to foreclosure, you will be asked on any future standard loan application (1003) if you have had a property foreclosed in the last seven years, therefore affecting your rate. Fannie Mae backed mortgages will be available to you following a short sale after two years. Fannie Mae backed mortgages will not be available to you for at least five years if you have lost your home due to a foreclosure.

Does it affect my employment opportunities?

A short sale does not appear on a credit report and will not challenge your current employment status. In comparison, if you have a foreclosure on your credit report, some employers consider it a reason for termination or reassignment since many run credit checks on employees for certain positions. A foreclosure can be extremely harmful to your chance of being selected for a new job if your credit report is taken into consideration.

How does a short sale versus a foreclosure affect the deficiency judgment?

If your short sale is handled successfully, the lender may give up the right to pursue a deficiency judgment against you. If the lender does pursue a deficiency judgment against you after a successful short sale, the amount will be considerably lower because your home was sold at a price closer to market value than that of an REO (Real Estate-Owned) sale. In all foreclosures, with the exception of those states without deficiency, the bank has the right to file a deficiency judgment against you. Since your foreclosed home will have to go through the REO process if not sold at auction for a lower sales price, this results in a higher deficiency judgment against you.