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Frequently
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Selling
Your Home - Q & A
Short Sales
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.
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.
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.
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.
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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