Sacramento Real Estate; Short Sales vs. Loan Modification

Information a homeowner needs in order to determine short sale or loan modification

As a professional in the Sacramento Real Estate industry, I’m frequently asked; is it better to do a loan modification or a short sale?  The answer is complex and varies according to each situation;

1. Do you have verifiable hardship?  Examples would be divorce, disability, death, job loss, medical issues, living check to check with no reserves.  The key here is “verifiable” so keep that in mind because whether or not you choose loan modification or short sale doesn’t matter as all banks, large and small, will verify your hardship as well as your financial documentation supporting your hardship.
2. Documentation typically required for both a loan modification and a short sale is:  most recent two years federal tax returns with signatures, most recent two months bank statements for all banks/accounts and including all pages even if blank, most recent two pay stubs for all borrowers on the loan.  In addition, you must include a hardship letter describing your hardship.
3. Do you have the financial means to make a house payment?  This will help determine if you should attempt a loan modification or a short sale.  Your debt to income ratio will be a large factor in determining your ability to pay.
4. Are there additional mortgages against the home?  Typically, it is difficult to modify additional mortgages, so this is yet another factor.
5. And finally, what is the reason for staying in a mortgage that the present value of the home will NOT support?  For example, if the present estimated value of your home is $200,000, but you owe $300,000 or more, what is the reason you must stay in that home?  Principal balance reductions are VERY RARE, so it’s likely that you’d be paying what you currently owe over 40 years (typical for a loan modification), but if you short sale then you cut your losses entirely.

The final question will ultimately reveal whether or not it’s to your advantage to apply for a loan modification or a short sale, but whichever you choose make sure you choose to work with a professional who is experienced and does NOT charge any upfront fees!  SB 94 (passed Oct 2009) prohibits anyone, including attorneys, from collecting upfront fees for a loan modification.

http://www.dre.ca.gov/cons_adv_fees_alert.html

In addition, Realtors do not charge upfront fees for short sales, so do your homework and make sure you don’t pay in advance for anything!

I am a longtime licensed Realtor, specializing in Sacramento Real Estate, Short Sales and Loan Modifications.  Please contact me anytime for FREE advice~

Happy Monday~!

Short Sales vs. Loan Mods