Tuesday, May 12, 2009

Short Sales Don’t Have to Ruin Your Credit!

Like markets across the country, Las Vegas real estate has been hit hard by declining values and many homeowners are unable to sell their properties without coming out of pocket. Good news has arrived for those who have so far kept their payments current, but have been seriously considering filing for bankruptcy or letting their homes go into foreclosure. Some lenders are now allowing homeowners to go ahead and do a short sale without first falling behind on their payments.

A short sale or pre foreclosure occurs when a homeowner owes more on his property than it is currently worth and the creditor agrees to take less than the amount owed. First the homeowner has to show proof of true hardship which can be due to a variety of reasons: loss of employment or drastic cut in pay, loss of income from investments (stock market declines), illness, divorce, or death in the family. The homeowner has to write a hardship letter explaining in detail why they can no longer afford the payments on the property. They also have to provide tax returns, pay check stubs and current financials to support the hardship letter.

After the seller completes the short sale documentation, the property is put on the market. Once a bona fide buyer makes an offer that is accepted by the seller, the listing agent then submits the offer and the short sale package to the lender for approval. The bank will do their own estimate of value and decide whether to approve or possibly counter the original offer with what they are willing to accept.

Until recently the banks were not willing to look at a short sale package unless the property owner was already behind in their payments. The late payments and the short sale settlement meant the that property owner took a huge hit on their credit scores and were ineligible to buy another home for at least four years.

But with the glut of Las Vegas foreclosures on the market and the increasing costs of maintenance on foreclosure properties, the banks are becoming a bit more lenient toward Las Vegas short sales. Some are now willing to approve a short sale even if the homeowners have kept their payments current. Most of the time the homeowner remains living in the residence and taking care of it until the sale, meaning the properties are in better shape and sell for more than they would later after foreclosure. The credit report reads “negotiated settlement,” and the homeowner may only take a minor hit on their credit score. If their scores were high enough to begin with, they may even be able to buy other lesser priced Las Vegas homes almost immediately, or as soon as they can save up the down payment money.

So if you have been feeling that you need to get out from under a huge mortgage balance, but you hate the idea of damaging your credit, there may be hope! The inventory on Las Vegas homes for sale is down dramatically from what it was a year ago, so it may not be as hard as you think. Contact one of our short sale specialists today and let us help.