Short Sales in New York and Westchester County

Why Is a Short Sale Better Than Losing Your Home in Foreclosure?

To begin, a little background on short sales. A short sale is where a borrower or homeowner owes the bank more than the value of their home. There are still many areas where home prices have never rebounded from their 2005 and 2006 highs. In many places short sales still make up a significant portion of the sales transactions. While homeowners are free to put their homes on the market for a short sale at any time, it must be approved by the bank. This can be a long and drawn out process taking anywhere from three months to a year.

The process involves a homeowner submitting significant documentation along with a contract of sale to the bank. These include a short sale application, paystubs, bank statements, tax returns, 4506T and potentially a variety of other documents depending on the circumstances of each homeowner. Once the documents are submitted the bank will usually order a BPO (brokers price opinion) or an appraisal to determine the value of the property and if the current offer is sufficient. If not they may present a counter-offer. Once the valuation is determined and price accepted you will either be approved or denied for a short sale.

If approved you will be sent an approval letter with a date you must close by and usually a short sale affidavit. The short sale affidavit is something you must sign attesting to the fact that this is an arms-length transaction (not between family or friends and based on fair market value), that there are no hidden agreements or understanding between the buyer and seller, that the seller will be vacating the premises and depending on the bank numerous other statements that the seller and buyer will be attesting to. After all of this you can finally close and move on with your life. There are many reasons I usually recommend proceeding with a short sale as opposed to letting the home be foreclosed upon

The Reasons Why Short Sales Are Better Than Foreclosures

There are numerous reasons a short sale is better than losing your home in foreclosure.

  1. It may buy you some more time in your home
  2. You can generally negotiate that the bank will waive any deficiency judgments against you
  3. You can probably get some money for relocation expenses
  4. It is generally better on your credit report

More Time In Your Home

So let’s start with being able to buy yourself some more time in your home. If you are in foreclosure and the bank will be seeking to sell your home at auction in the near future you can usually stop the auction with contracts of sale in place. Because it takes at least three months and usually a lot longer to get short sale approval the banks will almost always stop the foreclosure or at least the selling of your home until it is approved.

Have The Deficiency Judgements

One of the best reasons to do a short sale is that in a short sale most banks will waive any deficiency judgments. What this means is that the difference from what the bank receives and from the amount you actually owe will be waived by the bank. In a foreclosure there is no guarantee of this. This is very dependent on the bank and the borrower’s finances but we usually see it waived. While we do not usually see banks seeking deficiency judgments it is certainly a scary prospect and something that can be almost always avoided by doing a short sale.

Relocation Expenses

Another reason to do a short sale is that the bank will probably provide for some sort of relocation expenses. While is averages around $3,000 it can be substantially higher. There are also some new rules regarding HAFA that are just being implemented now that will allow for significant increases in the amount of borrower relocation funds that will be allowed.

Less Impact To Your Credit Report

Finally, on your credit report a short sale will have less of a negative impact on your credit score than a foreclosure and will allow you to purchase another home in a shorter period of time. Obviously, after being in default for prolonged amount of time your credit will have been damaged but a short sale will mitigate some of that and in some instances be done before a foreclosure allowing you more time to start repairing it.

 

Contact Peter Spino at ☎ 914-984-5315 for Short Sale assistance in Westchester and a free Short Sale consultation

 

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