What is a Short Sale?

 

A Short Sale, also known as a pre-foreclosure sale, is when you sell your home for less than the balance remaining on your mortgage. If your mortgage servicer agrees to a short sale, you can sell your home and pay off a portion of your mortgage balance with the proceeds. Depending on your situation you may be required to make a financial contribution toward the balance, but once the short sale is complete you’ll be relieved of your responsibility to pay any remaining balance—called a “deficiency waiver.”

 

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A Short Sale is an alternative to foreclosure and may be an option if you:

 

• Are ineligible to refinance or modify your mortgage

• Are facing a long-term hardship

• Are behind on your mortgage payments

• Owe more on your home than it's worth

• Haven't been able to sell your home at a price that covers what you still owe on your mortgage

• Can no longer afford your home and are ready or need to leave

 

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What are the benefits of a short sale?

 

• Eliminate your remaining mortgage debt

• Avoid the negative impact of foreclosure

• Receive relocation assistance in some cases — up to $3,000

• Start repairing your credit sooner than if you went through a foreclosure

• May be able to get a Fannie Mae mortgage to purchase a home sooner (in as little as 2 years) than if you went through foreclosure (up to 7 years)

 

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What is the process for a short sale?

 

If you qualify for this option, the process is similar to a normal real estate sales transaction. You'll work with a real estate agent to market and sell your home. Have your agent visit HomePathforshortsales.com for help with the short sale process. Your mortgage servicer will also be working with you and your real estate agent every step of the way to:

 

• Receive list price guidance

• Submit your best purchase offer to your mortgage servicer and any junior lien holder (if applicable)

• Agree to terms with the buyer’s agent, and,

• Access closing instructions from your mortgage company servicer (once the short sale is approved) to close the sale.

 

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In some cases, you may be eligible to receive relocation assistance (up to $3,000) to use toward your moving expenses and to make the transition to new housing easier.

 

A short sale may take up to 120 days, but this could be shorter or longer depending upon your specific situation. If you are unable to sell your home, you may be able to transfer the ownership of your property to the owner of your mortgage. This option is called a Mortgage Release or Deed-in-Lieu of Foreclosure). 

 

 

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What is a Mortgage Release (Deed-in-Lieu of Foreclosure)? 

 

A Mortgage Release is where you, the homeowner, voluntarily transfer the ownership of your property to the owner of your mortgage in exchange for a release from your mortgage loan and payments. Options are available (sometimes with a relocation incentive) to help you leave the home immediately; stay in the home for up to three months without paying rent; or lease the home (at market rates) for up to one year. Depending on your situation, you may be required to make a financial contribution to receive a mortgage release.

 

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A Mortgage Release is an alternative to foreclosure and should be considered if: 

 

• You are ineligible to refinance or modify your mortgage

• You are facing a long-term hardship

• You are behind on your mortgage payments or will fall behind in the near future

• You owe more on your home than it’s worth

• You don’t want to sell your home or haven’t been able to sell your home

• You can no longer afford your home and you are ready to leave

 

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What are the benefits of a Mortgage Release?

 

• Eliminate your remaining mortgage debt

• Avoid the negative impact of a foreclosure

• May be eligible for relocation assistance in some cases

• Start repairing your credit sooner than if you went through a foreclosure

• May be eligible for a Fannie Mae mortgage to purchase a home sooner (in as little as 2 years) than if you went through foreclosure (up to 7 years)

• Flexible exit options let qualified homeowners (or their tenants) leave the home immediately, or consider other ways to transition out

 

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What is the process for Mortgage Release?

 

To qualify for Mortgage Release, you’ll work with your mortgage company to:

 

• Complete the eligibility process, such as determining the value of the property and how much you still owe as well as reviewing your current hardship

• Review the options available under Mortgage Release (your mortgage company will help you choose the best option for your situation)

 

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A mortgage release usually takes around 90 days to complete, but this could be shorter or longer depending upon your specific situation.

Your next steps depend on which option you’ve qualified for. These include immediately vacating the home, staying in the home for up to three months (no rent), or leasing the home (paying market-based rent monthly) for up to one year.

 

Additionally, when you vacate the home at the agreed-upon date, you are required to leave the home—inside and outside—in good condition, free of interior and exterior trash, debris or damage, and all personal belongings must be removed. In some cases, you may be eligible to receive up to $3,000 relocation assistance to use toward your moving expenses and to make the transition to new housing easier.

 

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What is a Sale with Equity?

 

When your home is worth more than you owe on your mortgage and other debts secured by the property, the difference is called home equity. If you sell the home—a sale with equity, or equity sale—you can keep the excess funds once all debts and closing costs are paid. Selling a home with equity is an option if you have a financial hardship and can no longer afford the home, or if you simply want to exit the home for other reasons such as relocating or taking advantage of a strong real estate market.

 

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A sale with equity is an alternative to foreclosure; you should consider if you:

 

• Can no longer afford your home

• Are ineligible to refinance or modify your mortgage

• Are facing a long-term hardship

 

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What are the benefits of a sale with equity?

 

• Pay off your remaining mortgage debt

• Benefit from the equity in your home by keeping your share of the proceeds from its sale

• Use your proceeds for new housing, other expenses, or savings

• Avoid the damage to your credit caused by a foreclosure

• Have more flexibility and control over exiting your home

 

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What is the process for a sale with equity?

 

• Determine your equity and the financial costs and benefits of selling

• Find a local listing real estate agent

• List with your agent and follow any recommendations to get your home ready

• Work with your agent to market your home

• Negotiate offers and close

 

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You may also want to consider other home listing options such as online marketplaces that may reduce your selling costs.

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What is a Quick Sale? 

 

A "quick sale," it's the sale of a property that's in its defaulted mortgage's pre-foreclosure period. Pre-foreclosure is the time between mortgage default and foreclosure sale and is really a lender's grace period for borrowers.

 

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A quick sale is an alternative to foreclosure; you should consider if you:

 

• Can no longer afford your home

• Are ineligible to refinance or modify your mortgage

• Are facing a long-term hardship

 

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What are the benefits of a Quick Sale?

 

• Pay off your remaining mortgage debt

• Benefit from the equity in your home by keeping your share of the proceeds from its sale

• Use your proceeds for new housing, other expenses, or savings

• Avoid the damage to your credit caused by a foreclosure

• Have more flexibility and control over exiting your home 

• Sale the home in its “as-is” condition 

 

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What is the process for a Quick Sale?

 

• Determine your equity and the financial costs and benefits of selling

• Find a real estate investor 

• Schedule a walkthrough or survey of the property to assess estimated repair costs 

• Negotiate offers and close 

 

 

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What is a Foreclosure?

 

A foreclosure is the legal process where your mortgage company obtains ownership of your home (i.e., repossess the property). A foreclosure occurs when the homeowner has failed to make payments and has defaulted or violated the terms of their mortgage loan.

 

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A foreclosure can usually be avoided—even if you already received a foreclosure notice. See the chart (in "Foreclosure Comparison") to compare some other options: Short Sale and Mortgage Release (Deed-in-Lieu of Foreclosure). 

 

No matter the option, you must take action as soon as you can.

 

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What are the consequences of a Foreclosure?

 

• Eviction from your home—you’ll lose your home and any equity that you may have established

• Stress and uncertainty of not knowing exactly when you will have to leave your home

• Damage to your credit—impacting your ability to get new housing, credit, and maybe even potential employment, for many years

• May owe a deficiency balance after the foreclosure sale

• Lose any relocation assistance or leasing opportunities that may be available with other options

• Forfeit ability to get a Fannie Mae mortgage to purchase another home for at least 7 years (Fannie Mae guidelines)

 

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What is the process for a Foreclosure?

 

There are two main types of foreclosure:

 

• Judicial – supervised by a court with formal legal proceedings (civil law suit)

• Non-judicial – non-court supervised

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In both types of foreclosure, the homeowner receives the legal notice of foreclosure, the legal notice is published in the local paper (in most cases), and the home is sold at public auction. (For judicial foreclosures, you’ll be served with legal notice of the pending action, and the court will approve or set the foreclosure date and sale.)

 

The process and timing of a foreclosure can vary by state laws, and many other factors. However, your mortgage company can begin preparing the default notice/foreclosure proceedings on your home as early as 60 days after you have missed your first payment. That’s why you should take action early to begin working with your mortgage company to resolve your payment problems immediately.

 

 

How Do You Avoid Foreclosure?

 

The most important thing—take action now. You have nothing to lose (and everything to gain) by working with your mortgage company to avoid foreclosure.

 

If foreclosure is imminent, other options may no longer be available. However, you may still be able to leave your home without having to go through foreclosure. This means you won’t have a foreclosure on your credit history and you may qualify for relocation assistance to ease your transition to new housing.