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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? 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 what a short sale is, 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?

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, which is both costly and time-consuming.

In a short sale, the lender is able to recover as much of their loss as possible without costly legal fees.

Bear in mind, in order for a short sale to take place, 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?

Qualifying Factors

For a Short Sale to be considered, these two things must be true:

  • You owe more on your mortgage than your home is worth.

For Example:

Market Value: $200,000
Mortgage Balance: $250,000

In this example, the homeowner has an estimated $50,000 of negative equity.

  • You are experiencing a financial hardship that is preventing you from making payments.

Below is a list of hardships that qualify for short sale consideration.

  • Loss of job
  • Divorce
  • Death of Spouse
  • Job Transfer
  • Medical expenses from a serious illness for the homeowner or a family member
  • Natural Disaster
  • Military Service
  • Reduction in pay or hours

Forbearance Plan

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.”

Simply put, the lender and borrower structure a temporary mortgage plan that will enable the borrower(s) to bring their loan current. This is great in theory, but it will only work if you’re only a few months behind.

For Example:

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.

Loan Modification

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 $30,000 in backed payments, attorney fees, and late fees; wiping out all of their equity. Leaving the homeowner with $10,000 of negative equity. This is a prime example of how many homeowners lose all or most of their equity, so it is best to seek counsel 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 advantage to the homeowner is the release of personal liability to the property, and 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 but can take longer if the seller/borrower does not cooperate, or a counteroffer is submitted to the lender for review and approval.

What are the benefits of a short sale for the homeowner?

Short sales:

  • Are less damaging to the borrower’s credit report than a foreclosure.
  • Help the borrower eliminate debt still owed to the lender.
  • Give the borrower time to find a new place without having to pay their lender.
  • Do not require the borrower to pay real estate commissions or fees (3% – 6% of the total sale).

Does the homeowner get paid anything for a short sale?

Since the lender is accepting less than is still owed on the mortgage, the seller cannot receive any proceeds from the sale. However, if a seller meets HAFA (Home Affordable Foreclosure Alternatives) requirements, they can receive up to $3,000 provided the sale closes.

How does a short sale affect my credit?

A short sale does not affect your credit score, but not making your mortgage payment will have a significant impact on 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 the state of 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. 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 is extended retroactively every year, which enables a homeowner to exclude income from the discharge of debt on their principal residence.

Click HERE for more information.

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?

  • Purchase & Sales Agreement
  • Bank Statements (last 2 months)
  • Paystubs (last 2 months)
  • Tax Returns (last 2 years, must be signed & dated)
  • Cover Letter
  • Homeowner’s Financials
  • Hardship Letter
  • Buyer’s Preapproval
  • Market Summary
  • Repair Summary
  • HUD 1

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?

Mechanic’s liens are legal documents that enable a vendor or contractor to seek unpaid compensation. For example, suppose a homeowner hires a roofing company to install a new roof, and the homeowner does not pay the contractor for their work. The contractor can attach a mechanic’s lien against the property to collect any funds still owed. These types of liens affect the sale of a property because they are personal.

Loss Mitigation Option Benefit

Repayment Plan

Forbearance Plan

Loan Modification

Short Sale

Deed-in-Lieu

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
In conclusion, if you find yourself upside down on your mortgage loan and experiencing financial hardship, you may qualify for a short sale in Kansas City. Feel free to contact info@ibuyhomesinkc.com for any questions or concerns you may have. If you would rather submit your information on our website, click HERE and fill out the form. We will contact you at our earliest convenience.
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