Short Sale  & Other Options

Understanding the current market is critical.  Due to declining values many homeowners now face the real possibility of losing their homes.  Unfortunately, declining values can prohibit the refinance or the sale of a home because the home is now over encumbered for today’s value.  Thus, homeowners are struggling to make their payments if they find themselves with changed circumstances.

For those who are confronted with this situation or who know someone who is, there are basically three options:  a loan modification, a short sale or a foreclosure.

Loan Modification

If your circumstances have changed (ie. job loss, divorce, health issues, etc.) and you find yourself unable to make your house payments, the first thing you need to do is contact your lender. Some lenders have set up programs and may work with you to modify the current payment amount.

If your lender is unwilling or unable to work with you, other alternatives exist.  You could contact:   

1)  Arizona Mortgage Foreclosure Hotline -1-877-448-1211

2)  Homeowners Hope Hotline – 1-888-995-4673

3)  A Loan Modification Service is also available locally, though a small fee is involved.  We recommend you contact Kathleen McArdle at 602-576-2215 or kfieldssun@cox.net  

If the loan modification is not going to help your situation and you have a hardship causing the need to get out from under your house payment, a short sale is your next best alternative, to avoid foreclosure.  A definition of how a short sale differs from a foreclosure is basic to its understanding, as well as what it takes to qualify for a short sale.

Short Sale or Foreclosure

Definition of a Short Sale:  A short sale is asking the lender who holds the mortgage on the property to accept less than the amount owed on the property, thus the “short” in the sale.  The entire process can take from 1 – 6 months.

Definition of a Foreclosure:  The lender has taken control of the property through a trustee sale, the home is now in the lenders inventory.

While homeowners in either situation will not profit financially, the real payoff is what happens to your credit. A foreclosure in comparison to a short sale is devastating to your credit, please see the attached comparison.

Who can qualify for a short sale?

A.     Financial Hardship – There is a situation that is causing you to have trouble affording your mortgage.

B.     Monthly Income Shortfall – You have more month than money!  A lender will want to see that you cannot afford or will not be able to afford your mortgage soon.

C.  Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.

The information included above should not be construed as legal advice, simply information to help our clients in this unsettled market.  We recommend you contact a real estate attorney & if you cannot afford the consulting fee, an alternative is a program called:  “Lawyers Helping Homeowners” at www.AZLawHelp.org, which is staffed by volunteer lawyers. 

While it’s understandable that a person would be hesitant to take that first step, the temporary embarrassment will quickly be forgotten if a successful short sale can take place and the burden of unmanageable house payments is lifted from your shoulders.

Note:  the seller in a short sale does not pay sales commission or closing costs.

Please contact us if we can be of further assistance.

Some of the initial forms needed for a short sale are attached.

Time is of the essence to avoid forecloure.

Comparison of Foreclosure vs. Short Sale