If you found yourself having to negotiate with your lender to get out of your mortgage and have a Columbia SC short sale on your credit history, there are some things you need to do if you ever want to become a homeowner again.
Anyone who has been through a Columbia SC short sale is pretty much branded as a high-risk borrower, so new loans won't come quickly or easily in the future.
A short sale is when a lender agrees to accept less than is owed on a property, allowing the borrower to walk away and avoid foreclosure. Fannie Mae, the federally controlled mortgage investor, sets guidelines for the minimum amount of time that must elapse before a short-seller is eligible for another loan salable to the agency.
Waiting Period After a Columbia SC Short Sale
If you've been through a Columbia SC short sale, Fannie Mae requires a waiting period of at least four years for short-sellers who can only put down 10 percent on their next home. The waiting period is shortened to two years for borrowers who can come up with 20 percent.
Fannie does allow the four-year period to be cut in half for borrowers who can document that their Columbia SC short sale was a result of "extenuating circumstances." The agency defines these circumstances as one-time events that were beyond the borrower's control, such as job loss, medical bills, or a financial hit from divorce. Borrowers must also be able to show that they had no reasonable option other than to default.
Those who have been through a Columbia SC short sale who hope to someday obtain another mortgage should pay careful attention to their credit while riding out the forced waiting period. Frugal management of revolving credit should be first and foremost on your mind making sure outstanding balances do not exceed 30 percent of your credit limit. And borrowers should stay current on all of their credit obligations.
If you've been through a Columbia SC short sale, keep detailed records of income sources. New regulations require lenders to prove borrowers' ability to pay, and the more documentation you can offer, the more the originator can go to bat for you on a new mortgage.
Having a Columbia SC short sale on your credit history is not the end of the world, and certainly not as damaging as a foreclosure. Just realize, buying another home will be a challenge, but certainly not impossible.
Visit our Mortgage Info section of articles, including other articles concerning foreclosures and short sales by clicking on the Columbia SC Mortgage Info link to your right under Columbia SC Real Estate Categories.
There is still confusion today over the difference between Columbia SC short sales and foreclosures, so we wanted to hit the highlights of each in this short real estate minute video.
Both Columbia SC short sales and Columbia SC foreclosures will negatively impact your credit and ability to buy another home, but going the short sale route may give you a better chance of buying another home in a shorter period of time as opposed to allowing your lender to foreclose on your home.
We have other articles and tips pertaining to Columbia SC short sales and foreclosures by clicking on the Columbia SC Mortgage Info link to your right under Columbia SC Real Estate Categories.
Effective October 1, 2013, HUD has announced the following changes to their Federal Housing Administration (FHA) short sale requirements.
To be eligible, one must successfully complete a short sale under the FHA short sale program.
Short Sale Requirements for Columbia SC Borrowers
1) They cannot list the property with or sell it to anyone with whom they are related or have a close personal or business relationship. In legal terms, it must be an "arm's-length" transaction.
2) Any knowing violation of the arm's-length requirement may be a violation of federal law.
3) Your mortgage must be in default on the date the short sale transaction closes. Before closing, any additional liens against the property must be released. A lien holder who demands a payment to release its lien must submit a written statement, and an agreement to release the lien if that amount is paid.
For a standard preforeclosure sale, servicers must use a Deficit Income Test (DIT) to determine a homeowner's financial hardship. The IRS Collection Financial Standards is used to verify homeowners expenses not reflected in their credit report. Only owner-occupied properties are eligible for the standard preforeclosure sale.
Homeowners eligible for a streamlined short sale may not be required to submit financial information or have a financial hardship. Principal residences, second homes, investment properties, and service members who have received Permanent Change of Station (PCS) Orders are potentially eligible.
The appraisal of one's property should be completed within approximately ten business days. After the appraisal, the short sale file will be updated and prepared for review. In some cases, approval may be required by the investor and/or FHA, which may take more time.
As a new condition, one might be required to make a final payment (sometimes called a cash contribution) before closing. This payment will reduce the deficiency balance.
If one is an owner-occupant, acting in good faith, and successfully selling one's property, one may be eligible for an incentive of up to $3,000.
The revised FHA short sale addendum must be signed and dated by all parties. Under this addendum, all parties agree that the subject property must be sold through an arm's-length transaction. An arm's-length transaction is defined as a short sale between two unrelated parties that is characterized by a selling price and other conditions that would prevail in an open market environment. Also, no hidden terms or special understandings can exist between any of the parties (e.g., buyer, seller, appraiser, sales agent, closing agent, and mortgagee) involved in the transaction.
Get more mortgage tips and information by clicking the Columbia SC Mortgage Info link to your right under Columbia SC Real Estate Categories.
Perhaps the greatest advantage of Columbia SC short sales to beleaguered homeowners facing default and foreclosure is the opportunity to move on with life and put the bad debt behind them as quickly as possible.
Typically, Columbia SC short sales take longer to sell than normal home sales or foreclosures because of the time required for the parties-lender, buyer, seller-to respond. In the past waiting 6-18 months was common, now we find the process taking about 3-4 months if you are aggressively on top of everything.
Improved Columbia SC short sales management systems and lenders more willing to settle for a short sale than foreclosure has helped the transition and sped up the process. By comparison, as processing times and backlogged inventories continued to plague foreclosure markets last year, 2012 was proclaimed the “year of the short sale” and short sale inventories skyrocketed.
Columbia SC Short Sales Selling Slower Than Some Foreclosures
Now there are so many Columbia SC short sales on the market they are selling slower than foreclosures that have made it through processing, as well as “normal” sales. Demand is considerably less for short sales among investors, especially the institutional investors who are having a major impact on some markets, and as a result they are selling at a discount about equal or even greater than foreclosures.
Last year, nationwide, short sales of homes that had never entered the foreclosure process accounted for 22 percent of all US homes sales, more than all REOs and sales of pre-foreclosure properties combined, according to RealtyTrac.
As volumes of Columbia SC short sales grew, so did their discounts from normal prices and their time on market. Last month, the median time on the market for single family homes was 74 days in February, up from 71 in January according to the National Association of Realtors. Short sales had a median of 101 days on market, up from 94 in January. Foreclosures (REOs) were on the market for a median of 52 days, up from 47 days in January.
In December, when demand was lower, the differences were even more pronounced. Columbia SC short sales had the longest days on market with a median of 117 days. Foreclosures were on the market for a median of 45 days (60 days last year), while the median days on the market for non-distressed properties was 74 days (106 days last year).
Perhaps an answer to the problem Columbia SC short sales are having lies with the changing nature of demand for distressed properties with the bulk purchases of foreclosures, especially pre-foreclosures, by some institutional investors. Reports of single sales of thousands of properties are not uncommon, especially in markets where hedge funds are most active.
Are Columbia SC short sales still the shortest solution? For starters, compare NAR’s 74 day median time on market for February with RealtyTrac’s national average of 414 days to process a foreclosure and NAR’s 52 days to sell them. So in most places, short sales are still the less painful option.
We have more information pertaining to Columbia SC short sales and foreclosures under our Columbia SC Mortgage Info section in the Columbia SC Real Estate Categories to your right.
The idea of finding a Columbia SC short sale significantly less than market value should be forgotten. Those days are long gone, if they ever really existed in the first place.Lenders are just not going to absorb the loss of one dollar more than they have to.
Lenders are using automated systems to verify home values, along with broker opinions and appraisals, ensuring that offers they accept are in the ballpark of prices as they should be. Despite what lenders may say, they really have very little motivation to complete a short sale.
Points for Columbia SC Short Sale Buyers to Remember
Lenders will be looking at the net amount of an offer. A full price offer with 5% in closing costs is not a full price offer. Look at the net price because lenders surely will.
Most agents price short sales to generate offers. It’s very likely there will be multiple offers and the accepted offer will be at or above list. Going in 20% lower on a Columbia SC short sale is likely a waste of time.
Keep in mind, a Columbia SC short sale almost always transfers “as is”, and repairs are almost never completed.
Keep your offer clean and simple. Cash is king and so is a clean contract. Focus on the net amount and demonstrate your ability to close quickly. The fewer contingencies and stipulations you put in your offer, and the shorter the time frame to close the better.
Most Columbia SC short sales are not “binding” until approved. It’s fairly common for lenders to counter an offer that’s been under review for weeks or months. Right or wrong, this typically happens as a result of their research on market value. An experienced agent can often successfully appeal them.
Expect the process of buying a Columbia SC short sale to drag out for what seems like forever. Lenders would almost as soon go to foreclosure. Don’t even be surprised if the whole deal falls apart.
A Columbia SC short sale includes many variables completely outside of a buyer’s control. Often times, buyers just grow weary of the whole process and cancel their offer because they decide it’s just not worth the aggravation.
If you’re thinking of trying to buy a Columbia SC short sale, understand that it’s pointless to try and low ball a home because the lender will likely just reject the offer. Remember, the seller could care less. Getting a Columbia SC short sale is all up to the lender.