Short Sale Your Kansas City House
HOW TO SHORT SALE YOUR HOUSE IN KANSAS CITY
Don’t lose hope when you’re upside down and have little or no equity.
Do you need a Short Sale in Kansas City?
Are you upside down on your mortgage and need a short sale in Kansas City? Experiencing financial hardship and don’t know how to save your credit? Or, are you having trouble finding an experienced real estate professional who understands the short sale process and can walk you through it step-by-step?
If so, I am your solution!
In this article, I provide a detailed description of a short sale, how a short sale affects you, how to qualify for a short sale, and how we can help you complete your short sale in Kansas City from beginning to end.
So, let’s dive in, shall we?
What is a Short Sale?
A short sale is a sale of real estate that requires the lender (mortgagee) and seller/borrower (mortgagor) to agree on a price that is less than the amount still owed by the borrower.
In most cases, the lender and borrower will negotiate a short sale instead of proceeding with foreclosure. Foreclosures require the lender to hire an attorney to facilitate the transaction, both costly and time-consuming.
In a short sale, the lender can recover as much of their loss as possible without costly legal fees.
Bear in mind, for a short sale to occur, the borrower must prove they qualify for a short sale. A short sale cannot happen unless the borrower meets both qualifying factors.
Do I qualify for a Short Sale?
For a Short Sale to be considered, these two things must be true:
Market Value: $200,000
Mortgage Balance: $250,000
In this example, the homeowner has an estimated $50,000 of negative equity.
Below is a list of hardships that qualify for short sale consideration.
Investopedia defines a forbearance plan as “an agreement made between a mortgage lender and delinquent borrower in which the lender agrees not to exercise its legal right to foreclose on a mortgage, and the borrower agrees to a mortgage plan that will, over a certain time period, bring the borrower current on his or her payments.”
The lender and borrower structure a temporary mortgage plan that will enable the borrower(s) to bring their loan current. While forbearance plans are great in theory, it will only work if you’re only a few months behind.
Let’s say a borrower is $3,000 behind on their mortgage payment of $1,000/month. The lender may decide to structure a payment plan where the borrower is required to pay $2,000/month (double payments) for the next three months in order to cure the arrears balance and reinstate the loan.
Investopedia defines a loan modification as “a change made to the terms of an existing loan by a lender. It may involve a reduction in the interest rate, an extension of the length of time for repayment, a different type of loan, or any combination of the three.”
Loan modifications are the most common type of repayment agreement between the lender and a borrower. They typically involve temporary changes to a loan that can include a principal reduction, a decreased interest rate, or an extension in payments.
In some cases, a borrower may need a loan modification because of an adjustable-rate mortgage. These types of mortgages can be difficult for a borrower as the interest rate fluctuates periodically. If a particular situation or problem arises, a borrower can convert to a fixed-rate loan to prevent delinquency.
Moreover, I have to mention that a loan modification is not ideal for every borrower. Sometimes, as shown in the example below, a borrower may be too far behind on their loan for the arrangement to be beneficial long term.
For example :
Market Value : $200,000
Mortgage Balance : $180,000
Arrears (w/attorney fees & late fees): $30,000
Estimated Equity: -$10,000
As can be seen, the property value is $200,000, with a remaining mortgage balance of $180,000. The borrower fell behind on their mortgage payments and tallied up to $30,000 in backed charges, attorney fees, and late fees, wiping out all of their equity, leaving the homeowner with $10,000 of negative equity. The example above is a prime example of how many homeowners lose most or all of their equity, so it is best to seek guidance from an experienced professional before agreeing to a loan modification.
Deed-in-Lieu of Foreclosure
A deed in lieu is when a borrower signs the deed to the property back to their lender, so the lender doesn't have to accelerate foreclosure proceedings. There are both advantages and disadvantages to this type of agreement. The homeowner's advantage is the release of personal liability to the property, and the elimination of debt still owed to the lender. The downside is this type of agreement will result in a foreclosure on the borrower's credit report (200-300 point hit) and can take seven years to fall off.
How long does it take to complete a short sale?
Generally, a short sale can take anywhere from 3 – 6 months from start to finish. However, if the negotiation is more intense, it could take even longer. Please keep in mind that you (the seller) are not required to make any payments to the bank/lender during this time.
What are the benefits of a short sale for the homeowner?
Does the homeowner get paid anything for a short sale?
How does a short sale affect my credit?
A short sale does not significantly affect your credit score, but not making your mortgage payment will dramatically impact your score. Once payment is 30 days past due, your score could drop as much as 100 points.
What is a deficiency judgment, and can the lender sue the homeowner following a short sale?
A deficiency judgment is a ruling made by a court against a borrower whose mortgage foreclosure sale did not produce enough funds to pay the entire loan owed to the lender.
For example, suppose a homeowner is foreclosed on and their house is sold for $100,000, but they owe the lender $165,000. The deficiency amount would be $65,000.
Sale Price: $100,000
Mortgage Balance: $165,000
Deficiency Amount: $65,000
In Missouri and Kansas, a lender can sue following a short sale to collect the deficiency. To avoid a deficiency judgment, ask the lender to waive its right to a deficiency judgment, which will prevent them from coming for you in the future. If your lender agrees, the lender must include that they waive their right to a deficiency in the short sale approval letter.
Furthermore, the Mortgage Forgiveness Debt Relief Act of 2007 extends retroactively every year, enabling a homeowner to exclude income from the discharge of debt on their principal residence.
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What our team must know
How far behind are you?
HUD (Housing and Urban Development) has a guideline that a homeowner cannot be fur years or more behind on their mortgage in order to qualify for a short sale unless the homeowner has a conventional mortgage.
Who’s on the loan?
Working directly with the borrower(s) on the loan ensures that all the necessary documents are signed and completed. If the borrower is deceased, we work directly with the probate attorney and appointed executor or personal representative of the estate to finalize the transaction on behalf of the deceased homeowner. Only the borrower(s) on the loan are needed to finalize a short sale.
How many mortgages do you have?
We must know what we are up against. Do you have a second, third, or fourth mortgage on your property? Home equity lines of credit?
What’s your current interest rate, and is it adjustable or fixed?
Is there a foreclosure date scheduled? If so, when?
What type of loan do you have?
What documents do I need to provide the lender for a short sale?
What price will the lender settle for?
The lender bases its price on a third-party appraisal or BPO (Broker Price Opinion). It is important to note that knowing why the lender priced its offer at whatever price they choose is imperative to any counteroffer that is submitted. We always request a copy of the appraisal report to see why the lender arrived at their price. If we don’t agree with something on the report, such as repairs that were not taken into consideration, incorrect square footage calculations, comparable sales, etc., we will submit a counteroffer with supporting evidence.
How many disputes can I file?
Generally, the lender will allow one dispute, so we make sure that we submit repair bids, a letter of explanation, recommendations, comparable sales, etc. if we decide to submit a counteroffer.
Do mechanic liens affect my short sale?
Loss Mitigation Option Benefit
|Permanently changes loan terms|
|Helps catch up on payments|
|Temporary hardship assistance with reduced or suspended payments|
|May offer cash incentive|
|Allows you to stay in your property|
|Allows you to leave your property preventing foreclosure|
|Less damaging to your credit than foreclosure|