Short sales can be complex and lengthy transactions, but can be well worth the time and effort, says Jeff Shaw, owner of Century 21 Shaw Realty.
"They are not the easiest transactions to handle and require more expertise and persistence than most other transactions," he says.
Shaw will conduct free seminars throughout Hillsborough County, addressing short sales as they relate to buyers, sellers and investors.
A short sale is one in which the net proceeds from the sale are insufficient to pay the mortgage and other liens against a property. For a reduced payoff, the lender agrees to remove the lien. Shaw says a short sale is attractive because it does far less damage to one's credit than a foreclosure.
"It is estimated that a foreclosure can impact a credit score by 200 to 300 points, while a short sale will have an impact of only about 20 to 30 percent of that amount and in some cases even less," Shaw says. "Many people underestimate the value of good credit. It impacts your ability to do everything from buying a cell phone to renting an apartment or buying a television or a car.
The big key is to avoid foreclosure, he says.
"A foreclosure is one of the most damaging events your credit status can encounter," Shaw says. It "can have a very negative impact on your credit for several years. With a short sale, in many cases the seller will be able to purchase another home in 12 to 18 months or less.
"Salvaging your credit should always be the primary concern when making the decision between a short sale and foreclosure."
On a 30-year mortgage for $250,000, having a 7 percent mortgage rate compared with a 6 percent rate is equal to about $59,000 in additional payments over the life of the loan, according to Shaw.
"You can see that not protecting your credit can have a significant impact on your finances," Shaw says. "If the short sale is handled correctly, it should not result in a major black mark on your credit, but it can vary from lender to lender and there are no guarantees."
Can you do a short sale even if you are not behind on your payments?
"Many lenders will allow this, but what the seller must do is show a valid hardship and show that unless the short sale is completed, they will be behind on their payments," Shaw says. "Reason for hardships can vary greatly. The key is adequate justification as to why it's in the lender's best interest to accept the short sale."
A short sale can be a great investment in a home for a buyer, Shaw says.
"The downside is that from the time the offer is made, you may not get an answer back from the lender for two to three months, so unless you can wait that long for an answer as to whether it will even be approved, you may want to consider a regular resale home first," Shaw says.
In addition to being a real estate broker, Shaw is a Florida licensed real estate instructor and holds a certified public accountant certificate. For information on the seminars, call (813) 643-0054 or e-mail him at firstname.lastname@example.org.