Are you in a situation where you can't afford to pay you mortgage? You are not alone; I talk to three or four people a month in the same situation. I put together this short FAQ page in an effort to help. Let me know if I am missing topics that are important to you and I will update this page.

Q: What is a short sale?
A: A short sale is where the lender agrees to accept a discounted payoff in lieu of the full amount owed.

Q: Does a bank have to agree to a short sale?
A: No. The bank does not have to agree to a short sale. However, if you have a legitimate hardship and you work with the right people to create your submission package your chances are very good.

Q: If I do a short sale can I still get a mortgage on another property?
A: Under some conditions, yes. See the notes section below.

Q: What is the difference between a short sale and a foreclosure?
A: I am not a lawyer or an accountant so I am not qualified to give a comprehensive answer. However, I believe a few of the key differences are as follows:

Q: How do you apply for a short sale approval?
A: Getting short sale approval is a lot of work and not one you want to do on your own. You need to work with a Realtor and attorney who exclusively handles short sales.

Q: Do I (Eric Fernwood) handle short sales?
A: No. But I can recommend a Realtor that has a 95% success rate (compared to the 15% average). That is correct, 85% of applications are not approved and I believe that this is largely due to the experience of the Realtor in handling short sales.

Q: How do I know if I am working with a Realtor who really knows short sales?
A: I would ask them how many sort sales they have completed in the last 12 months? Also, what percentage of their total business is short sales?

Q: What if I have a HELOC?
A: To the best of my knowledge, the HELOC is separate from the mortgage and there is no way to get around this; you will have to settle with the lien holder separately. This is definitely an area where I would consult an attorney with extensive experience in this area.

Notes:

* Until 10/1/2009 the recourse time on foreclosures was 6 years, now it is 6 months according to Realtor Magazine.

* Effective TODAY (1/29/2010), the following updates have been made to the FHA underwriting guidelines regarding short sales:

Borrowers current at the time of short sale ARE eligible for a new FHA insured mortgage if, from the date of loan application for the new mortgage:

• All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, AND
• All installment debt payments for the same time period were also made within the month due.

Short Sales/Pre-Foreclosure Sales:

• Borrowers are NOT eligible for a new FHA insured mortgage if they pursued a short sale (or pre-foreclosure sale) agreement on their principal residence simply to:
  Take advantage of declining market conditions, AND
• Purchase at a reduced price a similar or superior property within a reasonable commuting distance

Borrowers in default at the time of short sale/pre-foreclosure sale:

Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are NOT eligible for a new FHA insured mortgage for a period of three years from the date of the pre-foreclosure sale.

Exceptions may be considered for borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) if:

• Documentation is provided to evidence the default was due to circumstances beyond the borrower's control (such as death of the primary wage earner, long term un-insured illness, etc...), AND
• The review of the credit report shows a satisfactory credit report prior to the circumstances beyond the borrower's control that caused the default.

In Summary

The key thing is to be proactive. Get a Realtor who knows short sales inside and out and works them every day. This Realtor also needs to be very aggressive since short sale departments are bombarded with calls and only the strongest Realtors can persevere and get short sales approved.

Call me today of you need a referral.

Eric Fernwood
702-358-8884
Eric@ISellLVHomes.com