Pre-Foreclosure, Short, or Compromise Sale
Provides you the option to sell your home for less than the amount owed on your mortgage
What you need to know
With an FHA or USDA pre-foreclosure sale, FNMA short sale, or VA compromise sale, you may have the option to sell your home for less than the amount owed on your mortgage. By doing this, you may be released from your obligation to pay back your primary mortgage under its original terms. And as your mortgage servicer, ServiSolutions may accept the proceeds of the sale as payment in full. A short sale can help you avoid a foreclosure sale and may be an option even if the foreclosure process has already begun. There may be times you are required to make a contribution that would be applied toward the short sale.
How you could benefit
As the homeowner, you may be able to:
Important considerations in a short sale
- Avoid a foreclosure sale once a written, signed offer is received and approved by ServiSolutions
- Stay in your home until the new owner closes, giving you time to make other living arrangements
- Pay no fees. All closing costs and real estate agent fees will be paid for with the sale proceeds.
- Begin your financial recovery more quickly
- Receive a relocation incentive, to be paid at the time your short sale is completed
If your mortgage qualifies for a short sale:
- We will work closely with you and your real estate agent. Together with your agent, we will determine the acceptable market value for your home, the list price, and amount of time you have to list and sell your home. We will stay in touch with you every step of the way.
- In most cases, the buyer of your home cannot be anyone you have a close relationship with, including family or friends.
- In some cases you may be required to pay a deficiency balance at or after closing. This is the dollar difference between the mortgage amount due and the sale proceeds when a property is sold for less than the amount still owed on the first mortgage. If this is the case, you will be informed before you commit to selling your property in a short sale.
- If you have any home equity loans, lines or second lines on your property, they will be considered separately from your first mortgage transaction. To ensure the short sale proceeds smoothly, it is essential that you begin working with any other creditors immediately after being approved for a short sale.
- A short sale may have tax implications. Be sure to consult your tax advisor to see if the deficiency balance needs to be considered as income on your tax return.
- Be sure to speak with your legal advisor about all possible implications of a short sale the potential impact to your credit score.
- A short sale may be more complicated, and sometimes unworkable, if you have a home equity loan or other liens against your property.
- A short sale is reported to credit agencies by a lender as “paid in full for less than the full balance,” an agreed settlement short of full payment.
- Allows you to sell your home for less than what you owe
- May release your obligation to repay the mortgage balance
- Gives you an active role in the process
- Helps you avoid a foreclosure sale and move forward sooner
- May include a relocation incentive
Short sale process
Timing can vary from FNMA's 45-day marketing period to FHA's 120-day marketing period, but short sales typically take longer than a traditional sale.
- Work with your real estate agent
- Obtain and work closely with a licensed real estate agent and provide ServiSolutions a Third Party Authorization to discuss information with your agent.
- Though permission to market (not short sale) the property is not required, an appraisal will provide list price guidance per your insurer's requirements.
- An MLS listing and completed listing agreement will be required, and depending on the insurer, a cancellation clause may also be required.
- If an offer is received
- Your real estate agent submits the offer with a HUD-1 or estimated net sheet to ServiSolutions or to the insurer's website for review, counter and/or approval.
- Expiration of the listing agreement, contract, and/or closing approval may require and addendum or re-application
- Certain incentives may apply
- You may be released from the deficiency balance
- Speak with a loss mitigation representative to find out more
- Funds are received by ServiSolutions at which time payoff is processed and the transaction is closed