Short Sales In Madison County- What You Need To Know If You are Buying Or Selling.
If you live here you most likely have heard about short sales in Madison County Illinois. You may have heard about them from your friends down the street, the news media, your neighbor or even perhaps one of your family members. We will go through important information that you need to know before you buy or sell as a short sale in this series.
We will be going through some important matters regarding short sales in Madison County, IL that you should understand whether you are buying or selling a short sale. In both instances, you must have patience.
What is a short sale? A short sale is when the homeowner owes more to his/her lender than the market value of the property. For an example: You have a loan on your house for $500,000 but in today's market a buyer will only pay $350,000 based on the last properties that sold in this neighborhood. Well, no buyer will pay $500,000 for this house so the seller will have to ask his lender if they will take less for the note that he owes to them. If the lender says yes, than that is a short sale.
Just as there are many different lenders there are just as many different policies governing the short sale procedures. The lenders all have their own criteria of what short sales they will accept. Just because your house falls in this category does not mean that every house will be approved for a short sale.
The next thing to understand for both sellers and buyers is that a short sale does take time.
We have had some short sales that have taken as short as one month to others that have been taking over 3 months to just get to the person at the lender who can make that decision. It is not as simple as just sending some documents in and that is it. There are formulas and procedures that lenders use and as I said above not all lenders use the same ones.
Some lenders outsource their short sales to a company that is proficient in the business of negotiating short sales. In these situations the lender gives the company a bottom line that they will accept, that is basically how much they are willing to lose to do the short sale.
And if you have mortgage insurance on your loan then the mortgage insurance company will also need to approve the short sale. What happens in this situation is that the mortgage insurance company will pay the lender the difference in the loss. Please be aware that many times the mortgage insurance company will want the seller to take back a note for some of the loss and pay some of that loss back to the mortgage insurance company.
The lender who you are sending your house payment to every month may own the note or they may just be a servicer for the lender. If they are the servicer for the loan there is an additional amount of time in the short sale process because there is yet one more entity with whom the short sale will also have to be approved by. This happens a lot in situations where your note has been sold several times in a short period of time or when the lender holding the note is an investor. In this situation, the investor must approve the short sale as well.
If you have a first mortgage and a second mortgage with different lenders that will certainly complicate matters more and also puts a kink into getting the short sale approved since the second note holder will want something to accept the short sale and usually the first note holder offers a mere token to the second note holder however you will need the approval of both lenders in order to close and pass a clean title to a buyer. Sometimes the second note holder will accept the sale if the seller agrees to owe a note to them and pay for some of the loss.
Why would a lender want to do a short sale in Madison county in the first place? Well, sometimes the loss they will accept on a short sale is less of a loss than if they foreclosed on the property. Foreclosing is not a cheap process at all and in Illinois it is very time consuming. Most homeowners can keep the lender at bay for months and sometimes even over a year. At times the lender feels it is better for their bottom line to accept a short sale.
Not every homeowner is qualified to do a short sale. Disclaimer: This post is not intended to be or to provide legal advice. We recommend that you speak to your attorney and your tax accountant regarding specifics and to find out if this is the best option for you in your situation.