What is a short sale in Delaware? In real estate, a short sale is defined as real estate sale in which the lender agrees to accept less than the balance of the mortgage. This article will go through the short sale process. Click here if you would like to search current homes for sale as short sales.
Some Homes that are currently Short Sales
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What is a Short Sale
A short sale is an agreement in which your mortgage lender agrees to accept a payoff on the loan for less than the balance.
Many lenders agree to a short sale because they receive more of the loan balance in comparison to the amount they would gain from selling the property following a foreclosure.
This process also aids in maintaining home values in the community the property is located and helps the homeowner maintain a better level of credit compared to a foreclosure..
Can I qualify for a Short Sale in Delaware?
In most instances, homeowners considering a short sale must meet specific criteria to qualify: you must be having trouble making your mortgage payment(s) or are already behind on your mortgage(s), provide evidence of personal and/or financial hardship, and have little or no equity in the property.
Some types of financial hardship include:
- Job Loss
- Downsizing
- Relocation
- Reduction in hours
- Medical Illness
- Divorce
- Death
How Does a Short Sale Work
A short sale is very similar to selling your home. You decide that you want or need to sell your house and you contact a REALTOR®. You may or may not realize you need to do a short sale at this point.
The first step is determing your home’s value or what is your home worth. At this point, you will need to know what your sellers estimated closing costs will be. If your net proceeds from the sale of your home are less than your mortgage and fees for selling are, you may need to do a short sale.
The biggest difference for a seller in a short sale is that the bank will need to approve the sale of your home and that you will have to provide the bank a number of financial information.
Why Would a Lender Do a Short Sale
The principal reason a lender will decide to do a short sale is that they are a bank and do not want to own homes.
They will go through the foreclosure process to get the home and take possession of the property, but it isn’t how they want the process to end.
Obviously, the foreclosure process is expensive to the bank as is owning the property. A bank would usually prefer to get the property off of their books.
This doesn’t mean that a bank won’t foreclose. It just means that that is not their first choice.
Can You Do a Short Sale if You Have a Second Mortgage
Yes. When there are multiple mortgages on a property, each lien or mortgage is recorded in a specific order. This order will determine how much of a claim each lienholder has on the property.
Each lienholder will have to release or sign off on the short sale.
In these cases, it pays to have someone as a REALTOR® who has experience in short sales as well as a short sale negotiator working with the banks on your behalf.
Why Would You do a Short Sale
House for sale
- Avoid Foreclosure
- No need to File Bankruptcy
- Lender pays all Homeowner Closing Fees
- Property Transfer Taxes
- Realtor® Commissions
Lender reports debt as “settled for less than full amount or settled as agreed”. This doesn’t have a long-term impact on credit report. The lender typically waives pursuit of future collection activity.
What is the Process of a Short Sale
The process will vary from state to state and by the lender’s procedures. Many variables affect when a lender will begin the foreclosure proceedings including:
- Has the borrower declared bancruptcy previously
- Length of delinquency
- Is or has borrower applied for a loan modification
How is a Short Sale different from a Regular Sale
A short sale in Delaware is not a typical real estate transaction. Most real estate transactions involve the home seller and their real estate agent, the buyer and their lender, and their real estate agent. In a short sale situation, all of those parties in addition to the seller’s loan servicer, a housing counselor, any junior lien holders, mortgage investors, and insurers may be involved too.
How Can I find a Real Estate Agent for a Short Sale
There are a couple of factors you will want to consider when choosing an agent to represent you for a short sale. The first one is do they have experience with selling a short sale. The reason it is important to choose someone with experience is that there will be things that come up in a short sale that are unlike what most agents encounter in a regular sale.
Personality is another factor you will want to consider. You want to choose someone with a cool head that can deal with the process without getting frustrated. This process can take several months and can be difficult.
How Can I list My Delaware Home as a Short Sale
Homeowners agreeing to a short sale in Delaware should also consult a tax expert and obtain the services of an attorney to help protect themselves from any future claims by the lender.
You will want the advice and expertise of a REALTOR® who has your best interests in mind and will expedite the short sale transaction.
How Long after a Short Sale Can I Buy a Home
Homeowners typically experience some negative impact to their credit score once lender reports the credit bureaus.
Credit is very subjective and varies depending on homeowners other credit variables.
Homeowners can begin to repair credit once a short sale is completed.
Homeowners may be able to qualify for a new mortgage in approximately two to two and one-half years if their credit has been repaired.
Tax Implications of a Short Sale
Any debt forgiven by the lender is considered taxable income and a 1099C is issued. Homeowners should consult both an attorney and an accountant to fully understand the legal and tax implications of a short sale.
Pre-Foreclosure
Once a homeowner goes into default on the terms of their mortgage, the pre-foreclosure process commences.
The lender calls and sends written correspondence to the homeowner asking them to make payments to cure the default.
If no payment or arrangments to pay are made, the lender sends notice that foreclosure proceedings will begin.
What is the Difference between a Short Sale and a Foreclosure
Bankrupt couple moving out of house
Judicial Foreclosure-A court proceeding which starts when a lender files a complaint, Lis Pendens, and records a notice in public records announcing a claim on the property. The homeowner is served a notice of complaint either by mail, direct service, or publication of notice. The homeowner is given time to dispute the claim before proceedings continue.
Non-Judicial Foreclosure-Requirements are determined by state statute. No court intervention is necessary for filing. When a default occurs, the homeowner is mailed a default letter. In many states, a Notice of Default is recorded. If the homeowner fails to cure the debt, a Public Notice of Sale can be mailed to the homeowner, posted in newspapers, and public places as required by state law.
Once the cure period has endend the lender will start formal foreclosure proceedings. Lender may or may not hire an attorney to file a public compaint (notice of foreclosure) as a means to remedy the default. Complaint must be reviewed by courts and a date set for the actual foreclosure or sheriff sale. In Delaware, you can find out if a home is going to sheriff sale by visiting the New Castle County Sheriff Sale page.
What is a Post-Foreclosure
On the pre-determined date a foreclosure or Sheriff Sale is held. The property can either be bought back by the lender or by the highest bidder once the lender bids or fails to put in a bid.
If the former homeowner is still residing in the home, the eviction process begins. If the lender wins the bid, the property becomes an REO property (bank owned), and goes back on the market.
Buying a Short Sale
Below you will find some homes that are short sales in New Castle County Delaware. You may also like to read this article
-So You Want to Buy a Short Sale 7 Things You Should Know.