From the Star Ledger:
But Goldie Sommer, a real estate attorney and agent, said there is no reason why anyone can’t navigate a short sale.
Sommer, a principal at Fairfield-based Sommer and Engelhart, has overseen more than 250 short-sale deals over the past two years.
Your Business took a closer look at short sales with Sommer:
Q. Can anyone apply for a short sale?
A. Yes, you can even do a short sale on government-backed (HUD loans) and FHA loans. Many of my short sales are on government-backed loans.
The restrictions for short sales of a government-backed loan pertain to the purchase of a subsequent home with government backed funds (FHA funds), not the short sale of one.
Q: How does a short sale affect your credit score?
A. I can’t give you exact numbers. But I’ve heard it’s about 50 points off your FICO (score) versus 200 on a foreclosure. And it doesn’t say foreclosure on your credit report. It will say “mortgage paid not full amount.” So, everybody knows. But my clients are so upset. They are devastated, because they always had good credit. I tell them, you don’t stick out as an unusual case because everyone is going to have this on their credit score.
Q. What’s the sticking point for people in New Jersey?
A. In our state, lienholders are allowed to pursue homeowners for any deficiency under a short sale. We have found that we encounter more problems negotiating the short sale with the second mortgage holder than with the first, especially if the second loan is high.
I do not believe this problem is addressed under the new rules and will continue to be an issue for our homeowners if they have second mortgages.
Q. How long does the process take?
A. If you are lucky, you can get a short sale approved in as little as two or three months. But we’ve seen them take as long as a year.
That doesn’t mean that the bank won’t go forward with a foreclosure. They will, and they usually do. Normally, however, the house will get approved for short sale well before a house goes up for a sheriff sale.
When an approval is received on a short sale, the typical letter states that we have 30 days from approval to close title. The buyer must scramble to obtain financing, order title work, survey, etc. in a short amount of time. The new rules will give homeowners a minimum of 90 days to close. This is a big plus.