Should my clients continue to make their mortgage payments in a Short Sale transaction?

I get this question asked to me a lot from REALTORS who are not sure how to answer a distressed homeowner on a listing appointment. There are occasionally the home owner’s that can continue to make their payments throughout the short sale process. Barely, but they can. Please keep in mind that you cannot advise your client either way but you can offer them advantages and disadvantages of making your payments and not making your payments. Everyone’s situation is different in a short sale and everyone has different goals and objectives. The other thing to understand is that short sales are designed for people that have a genuine hardship. I have negotiated short sales where the homeowner has never missed a payment, however, there has to be a genuine hardship.


Here are the advantages and disadvantages of making your payments and not making your payments in a short sale:



Advantages of making your payments:



A) The home does not go into foreclosure, giving you plenty of time to get the transaction done.


B) The homeowner will not receive any late payments reporting on their credit report.


C) It will be easier to find a place to rent when it is time to move.




Disadvantages of making your payments:



A) The homeowner will not receive any of this money back.


B) Homeowner may be denied for a short sale until he or she is late. (This is a requirement for FHA and the HAFA program) and certain lenders will not look at a short sale until a homeowner is behind.


C) The process may take longer.



Advantages of NOT making your payments:



A) Homeowner will qualify easier for a short sale when they are behind. This shows a severe hardship.


B) Homeowner can still live in the home while the short sale is being negotiated. I always let the homeowners know when it is time to move there will be an extra deposit most landlords will require due to the liability factor. If they choose to not make their payments, they should put some of that money away for their transition.



Disadvantages to NOT making your payments:



A) Once a homeowner misses three consecutive mortgage payments, the NOD is filed and the foreclosure process begins. (REALTORS, make sure you know the California foreclosure time lines)


B) Late payments will be reported on the homeowner’s credit report.


C) Thus, making it harder to find a rental.



It has been my experience that most homeowners in this market that are pursuing a short sale are looking for guidance. We need to be careful as REALTORS on the guidance that we give. If we give them truth and reality from all angles, homeowners will be able to make the best choice that fits their goals and objectives.




(Quote) Again and again, the impossible problem is solved when we see that the problem is only a tough decision waiting to be made.
Robert H. Schuller


REALTORS, what is in your business plan this year? What are you doing to create a system that will allow you to build your short sale business? How often are you out there prospecting and how do you know if you are taking the listings that are going to be successful and not a waste of your time?


Call us today and let us show you a system that works to help you expand your business and effectively and efficiently close short sale transactions.


LOTUS REALTY GROUP


PROFESSIONAL SHORT SALE NEGOTIATORS



At Lotus Realty GROUP, helping people ethically succeed is at the forefront of who we are.....