Penny Liu

Short Sale F.A.Q.

 

1.       What is a Short Sale?

a. It means the borrower owes more on a home then the current market value.

 

2. Why should I do a Short Sale?

a. Short Sale will delay the foreclosure process which means the homeowner can stay in the home longer.

b. Short Sale is also better for the homeownerís credit.

 

3. When should a homeowner consider a short sale?

a. When the homeowner is struggling with paying the monthly mortgage payment

b. After the homeowner has already tried loan modification

 

4. Why does Short Sale take so long?

a. Not all Short Sales take a long time. It depends on the bank, number of banks that are involved, and how complicated your situation is. Some banks consistently approve short sales in 30 days while others take over a year.

 

5. Why do Short Sales get rejected?

a. The number one reason is that not all the paper works have been submitted

b. The short sale process was started too late and the bank will not grant an extension to the foreclosure. This is why it is important to contact your realtor as soon as possible.

c. Inadequate follow-up and/or not communicating with the bank

d. Offer price was so low the bank does not even want to counter

e. Offer was incomplete and missing pre-qualification or proof of funds

 

7. Do I have to work with a real estate agent and who pays the commission?

a. You cannot represent yourself in a Short Sale transaction. You must work with a license real estate agent. Donít worry, it is FREE to work with an agent. . The bank will pay for all the cost including the agentís commission.

 

8. What happens after the Short Sale is approved?

a. Once the Short Sale is approved, the transaction proceeds similar to a normal equity sale. Escrow time is what was originally agreed on in the purchase agreement. You have until the close of escrow to move.

b. As a homeowner you cannot delay escrow or ask to stay in the home for a longer period of time.

 

9. What happens to my Credit after a Short Sale?

a. That depends on where your credit currently is. The higher your FICA score, the more it will fall. For example:

 

FICA 680

FICA 780

Short Sale Loss

45-65 point

105-123 points

Foreclosure Loss

95-105 points

140-160 points

 

10. A late payment of any kind has the same negative impact on credit score regardless of the amount of money that was late.

a. This means being $10 late on a credit card payment is the same as being $2500 late on a mortgage payment.

b. Also if a credit card company agrees to let you pay 50 cent on the dollar that will impact your credit score just as much as a loan modification.

c. As you are going through the Short Sale process if you are also not paying other bills such as HOA or property tax, each of those late payment will negatively further decrease your FICA score.

d. Each late payment and short sale decreases your score. A short sale doesnít wipe out previously lowered scores that you received for not paying the mortgage payment.

 

11. Loan Modification may or may not decrease your FICA score, depending on how the lender reports the modification.

a. If the lender just changes the interest rate or length of time to repay the loan, it may not impact your FICA score.

b. However if the lender wrote down the principal amount, your FICA score may be lower.

 

12. How to INCREASE your FICA score after a Short Sale?

a. Pay you bills on time

b. Keep credit card balance low

c. Only open new credit card if you really need it. Donít open credit cards that you donít need.

d. Consumers FICA score will start to improve after two years. It may take up to a few more years for it to recover to its original level.

 

13. How long do I have to wait after a Short Sale before I can buy a home?

a. That depends on what kind of loan you want and how much down payment you are putting down. Here are the current rules.

 

Waiting period after Short Sale

Fannie Mae & Freddie Mac

After Year 2

put 20% down payment

After Year 4

put 10 % down payment

After Year 7

put less than 10% down payment

 

 

 

For Foreclosure after 5 years- FHA

After Year 1

Chapter 13 after approval of court

After Year 2

bank property after Chapter 7

After Year 3

Foreclosure, Short sale, Deed-in-lieu, and pre-foreclosure:

 

 

  penny@pennyliu.com                             (626) 890-9218