How Does a Naperville Short Sale Affect the Seller’s Credit Score?

How Does a Naperville Short Sale Affect the Seller’s Credit Score?

How much impact does a Naperville short sale have on a seller’s credit score?

When you pay less than what is due on any debt, it stands to reason that your credit score will take a hit, especially when it comes to a mortgage. Both, a short sale and a foreclosure will negatively impact your credit score.

The term ‘short sale’ doesn't actually appear on your credit report.  It will, instead, appear as a mortgage that was ‘settled’ for less than the full balance.  Settled accounts, especially when it comes to a mortgage, are very negative.

Any delinquent payments leading up to a short sale will remain on your credit report for seven years from the original date you let your mortgage go delinquent.  If you were consistently on time with your payments, the mortgage will remain on your credit report for 7 years from the date it was reported or paid.

I strongly recommend that you find out and understand exactly how your lender will report your short sale, foreclosure or deed in lieu of foreclosure to the credit reporting agencies and if they will sell the remaining debt to a collection reporting agency.

The impact on your credit score will depend on how your mortgage was closed and reported on your credit history, and your FICO score prior to the short sale (or the starting score). The higher the starting score, the longer it will take for it to fully recover.

Let’s say you have a good starting credit score of 780, it will take your FICO score around 7 years to fully recover. This is true for both short sales and foreclosures. However, if the starting FICO score was lower, the short sale seller’s score can fully recover in a shorter period of time.

Distressed homeowners with a FICO score around 680 can recover their scores in around 3 years, which is less than half of the amount of waiting time than those who had higher FICO scores prior to the Naperville short sale.

The number of days you were late on your mortgage, or what we call mortgage delinquency, also greatly affects your credit score, dropping by 50-250 points.

Here is a table showing the impact of mortgage delinquency on the credit score. The second table shows the time it takes to fully recover based on the starting FICO score:

If these figures alarm you or make you feel hopeless, don’t be! There is still hope of rebuilding your credit after a Naperville short sale.

Here are some things you can do to rebuild your credit:

• Pay all your bills in full and on time. – This includes your credit card bills, utility bills, monthly phone and internet charges, etc. Although they are not required to do so, you can request these companies you make your payments to report to the credit bureaus that you have made your payments in full and on time. They will do it if asked. Credit bureaus give more weight to credit card payments than utility payments but if you are working on rebuilding your credit, nothing is too small or too big. Every single payment you make in full and on time counts.
• Don’t close your existing credit card accounts. – Keep your credit cards open as this will lower your debt to credit ratio and improve your credit score as you pay off your balances. Avoid opening a new credit line.
• Try applying for a secured credit card. – If your credit card accounts have closed after a Naperville short sale, you can try applying for a secured credit card. This is a good way to rebuild your credit score as well as control your spending since the amount of money you deposit acts as a self-imposed credit limit as well as collateral.

Although a Naperville short sale can greatly affect your credit score, you still have a chance at rebuilding your credit. Use the waiting period wisely, whether 7 years or less, as a time to do these things that will help you improve and rebuild your credit score and save for a new home so you can get another chance at homeownership after a Naperville short sale.

If you are ready to do a Naperville short sale, call me, Teresa Ryan at 630-276-7575.  As Broker/Owner of Ryan Hill Realty – www.RyanHillRealty.com, I have the experience and tools to help you sell your Naperville short sale home.

If you have already gone through a short sale, The Federal Housing Administration’s recent Back To Work Program could be the answer if you want to apply for a home loan again in a shorter period of time.  Talk to me, Teresa Ryan, or talk to a member of my certified expert team to see if you are eligible, call us today.

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Teresa Ryan

Broker/Owner, CDPE

Ryan Hill Realty

1288 Rickert Dr Suite 300, Naperville, IL 60540

630-276-7575

TRyan@RyanHillRealty.com

Can a Seller Rent Back Their Home After a Naperville IL Short Sale?

Can a Seller Rent Back Their Home After a Naperville IL Short Sale?

In most cases, the short answer is ‘No’.  When you start your paperwork with the lender, they will have all parties sign an Addendum stating that the Seller must vacate the property at or prior to the close of escrow. It will also specifically state that the buyer will not enter into a rental agreement with the Seller after escrow closes.  An important agreement you will receive is the Arm’s Length Agreement (ALA), please go over this agreement with your lawyer and real estate agent to make sure that you understand all the terms and conditions it contains.

Once a buyer has purchased a home in a Naperville IL short sale, it's his or her right to do with it as he or she pleases. The rights of ownership of a short sale home are the same as they would be after a traditional sale, with a few exceptions.

It is the buyer’s decision to live in the home, resell it, or rent it out to whomever the buyer prefers, including petition the lender to allow them to rent to the former owner. However, the final decision is up to the lender.

If the Buyer and the Seller are not family or related in any way, and wish to pursue this line of action, both parties must disclose their intention to the lender (with the help of lawyers) prior to signing the Addendum or any agreement for that matter, to try and negotiate these terms.  A full disclosure to your lender is essential.  Failing to do so and renting back to a Seller is considered fraudulent and could rescind the short sale after closing.

If, on the rare occasion, the lender agrees in writing to allow the seller to rent back the house from the buyer, then the new owner needs to make sure that the previous homeowner, and now their tenant, is able to meet the monthly rental amount.  Keep in mind that the homeowner defaulted on their monthly payment to the lender to begin with and went into foreclosure.  

The best thing to do is for new owners to request for a credit report and verification of the tenant’s income. If the tenant can’t account for his or her money, then the new owners should think twice before signing a lease contract. If the credit report shows that he or she has been in arrears on debts that he or she should have paid.

If the new homeowner is satisfied that the seller is capable of making monthly rental payments, then the benefit of renting a Naperville IL short sale home to the former owner is mutually beneficial.  The home will start generating income immediately, and in the long term, the home will appreciate in value.

The best thing to do is to talk to your lender and check the fine print if there is any clause stating that the Naperville IL short sale seller is not allowed to purchase or rent back the home. If you really intend on renting back your short sale home, make sure to formally disclose it to your lender to avoid being accused of fraud and get their approval in writing.

Talk to an experienced Naperville short sale agent or call me, Teresa Ryan at 630-276-7575.  As a Broker/Owner of Ryan Hill Realty - www.RyanHillRealty.com, I have the experience and tools to help you sell your Naperville short sale home.

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Teresa Ryan

Broker/Owner, CDPE

Ryan Hill Realty

1288 Rickert Dr Suite 300, Naperville, IL 60540

630-276-7575

TRyan@RyanHillRealty.com

What's the First Step in A Naperville IL Short Sale?

What's the First Step in A Naperville IL Short Sale?

Before you ask your Naperville IL short sale agent to place your short sale listing into the MLS, it’s important to know the first step in the short sale process.

Don’t make the big mistake of other overly anxious sellers who skip the first step of the short sales process and immediately jump into accepting offers.  More often than not, this less-informed method only leads to more stress and anxiety.  Take the time to learn about the important first steps in the short sale process, and you will be in a stronger position to consider the right offers.

The first thing you should do, with the help of your short sale agent, is to identify what type of short sale you have.

The secret to identifying what kind of short sale you have lies with your lender and the type of mortgage loan on your home.

Here is a step-by-step checklist of the first things you should do in the short sale process:

• Contact your lender. Start by calling your lender’s customer service number and ask for the Loss Mitigation Department. Have your mortgage loan number ready.
• Request for the lender's authorization form. This will allow your Naperville IL short sale agent to speak to the lender on your behalf. Send back the signed authorization form to the lender as soon as you hire an agent. It takes up to 5 days for the lender to acknowledge your authorization letter, so don't delay.
• Ask your lender what type of loan you have. Find out if your bank owns the loan or if it is merely a servicer of the loan. If your bank is just the servicer, ask the bank who owns your loan.
• Depending on the type of loan, choose your type of short sale. Each short sale is different and if you choose the wrong type of short sale, you risk facing personal liability and losing out on possible relocation assistance funds.

Here are some of the different types of short sales based on the type of loan and the short sale seller’s personal situation:

• HAFA Short Sale - This is only available to sellers of a personal residence who are going through a severe financial hardship and have limited cash assets. The HAFA short sales aim to streamline the short sale process, release the seller from financial liability, and provide relocation assistance.
• Traditional Hardship Short Sale - The short sale seller’s hardship letter will be closely evaluated. Borrowers with loans that were originally purchase money loans have a better chance at a successful short sale.

Ask Teresa Ryan about these types of short sales in Naperville and the Chicago area market.

• Strategic Short Sale
• Fannie Mae Short Sale
• Freddie Mac Short Sale

These are just some of the several types of short sales. The best thing to do before proceeding with a Naperville IL short sale is to work with an experienced Naperville IL short sale agent who can help you navigate the short sales process.

If you are ready to do a Naperville short sale call me, Teresa Ryan at 630-276-7575. As a certified short sale agent and Broker/Owner of Ryan Hill Realty - www.RyanHillRealty.com, I have the experience and tools to help you sell your Naperville short sale home.

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Teresa Ryan

Broker/Owner, CDPE

Ryan Hill Realty

1288 Rickert Dr Suite 300, Naperville, IL 60540

630-276-7575

TRyan@RyanHillRealty.com

Questions to Ask A Short Sale Agent In Naperville

Questions to Ask A Short Sale Agent In Naperville

If you are considering something as serious and as complicated as a Naperville short sale, it is necessary to seek the help of short sale experts.

There are many short sale agents out there, and having too many options can get confusing and overwhelming.

Here are some questions you should ask a prospective short sale agent before hiring him or her to sell your home as a short sale:

• How many short sales did you close last year?

It’s easy for agents to take on many short sale listings but it’s tough to get these short sales approved by the lender and closed. Since your goal is to successfully close your Naperville short sale, then the agent’s closing ratio is very important. The average success rate in closing short sales is said to be between 15% and 45%.

• Are you personally involved in the negotiations or will you hire a negotiation company?
• Do you have a team or do you work alone?
• Do you make phone calls yourself?
• How often do you plan to update me?
• How long does it usually take to wait for an approval from the different banks?

Listen carefully to the agent’s answer to this one as it will show you his or her relationship with your lender.

While interviewing the agent, check their facial expressions and behavior as they answer your questions. Their answers will help you find the most experienced and best Naperville short sale agent for the job.

If you are ready to do a Naperville short sale call me, Teresa Ryan, a certified short sale agent at 630-276-7575.  As Broker/Owner of Ryan Hill Realty - www.RyanHillRealty.com, I have the qualifications, experience and tools to help you sell your Naperville short sale home.

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Teresa Ryan

Broker/Owner, CDPE

Ryan Hill Realty

1001 E. Chicago Ave., Ste. 103

630-276-7575

TRyan@RyanHillRealty.com

What is the BPO in a Naperville Short Sale?

What is the BPO in a Naperville Short Sale?

A BPO (Brokers Price Opinion), is similar to a home appraisal. Real estate agents prepare BPOs by doing an inspection of the property and researching recent sales of similar properties in the area and current market trends to estimate the short sale property’s current value.

Once the lender receives a short sale package, the lender requests a BPO from a real estate agent to assess if the offers for the short sale are reasonable.

The BPO is crucial to the short sale process and could make or break the transaction. To make sure it is handled correctly, your Naperville short sale agent should meet with the BPO agent to make sure they have all the information they need. This can be done by including notations in the file stating that the BPO agent has to contact the short sale agent in order to gain access to the property.

Your agent should also prepare a package to be handed to the BPO agent which usually contains a hardship letter, a comparative market analysis or appraisal, and anything that can reduce the value of the property - like damages.

The BPO agent should know that the purpose of the evaluation is a short sale approval. Try to get them as emotionally involved as possible to let them know that their evaluation of the property will have a big impact on your life by providing them with important facts.

Since the BPO has a huge impact on the outcome of the Naperville short sale process, the agent should be very knowledgeable on current market values of Naperville luxury homes in your area and understand the entire scope of the short sale.

If the agent is not very knowledgeable in this area, then their BPO may do more harm than good on your short sale.

An experienced short sale agent will know how to positively influence the value of the BPO for a better short sale outcome.

The best way to avoid these BPO problems is to work with an experienced and certified short sale agent from www.RyanHillRealty.com who knows and understands the process, and can help guide the value of the BPO in the right direction so you can get a favorable outcome for your short sale.

If you are ready to do a Naperville short sale call me, Teresa Ryan, a certified short sale agent, at 630-276-7575.  As Broker/Owner of Ryan Hill Realty - www.RyanHillRealty.com, I have the qualifications, experience and tools to help you sell your Naperville short sale home.

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Teresa Ryan

Broker/Owner, CDPE

Ryan Hill Realty

1001 E. Chicago Ave., Ste. 103

630-276-7575

TRyan@RyanHillRealty.com

What Is a Short Sale HUD-1?

What Is a Short Sale HUD-1?

A short sale can be frustrating for a seller who has no experience with Naperville short sales.

One of the unfamiliar terms a first-time short sale seller might encounter is the HUD-1.

What is a Short Sale HUD-1?

It is a document listing all the debits and credits in a real estate transaction. It is created for the benefit of the buyer and the buyer’s lender. However, that does not stop the short sale seller’s lender from asking for the HUD-1 during the approval process.

What do Banks Look at on a Short Sale HUD-1?

Banks focus on the sales price on an HUD-1. If the bank’s declared price is greater than that on the HUD-1, the seller needs to ask for a new purchasing price from the buyer. Other fees to be reviewed by the bank are the title, transfer, escrow, notary, documentary stamps, and delinquent property taxes.

Fortunately, not every lender requires HUD approval. Many junior lien holders do not approve HUDs because they are only concerned about the amount they will receive from the short sale.

The estimated HUD-1 Settlement Statement is a complete account of all the fees and prices involved in the short sale. This settlement form specifies how much money each party gets upon final transaction.

Do Banks Reject Fees on the Short Sale HUD-1?

Banks usually refuse to pay for items like repairs, home warranties, and pest clean up costs. Banks also refuse to pay HOA or UCC fees. Either the buyer of short sale seller needs to negotiate for the payment of the balance of these fees.

What is the Most Common Problem Associated with a HUD-1?

The biggest problem with a HUD-1 is failure to agree on which party pays for certain fees. This may cause confusion and tension between the parties when closing time comes and the sellers or buyers are required to pay for unforeseen fees.

To avoid confusion with the HUD-1, it is highly recommended that the HUD-1 be looked over by an professional Naperville short sale agent so any questions or concerns may be answered.

If you are ready to do a Naperville short sale call me, Teresa Ryan at 630-276-7575. As a certified Short Sale agent and owner/broker of Ryan Hill Realty - www.RyanHillRealty.com, I have the experience and tools to help you sell your Naperville home.

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Teresa Ryan

Broker/Owner, CDPE

Ryan Hill Realty

1001 E. Chicago Ave., Ste. 103

630-276-7575

TRyan@RyanHillRealty.com

How to Write An Effective Naperville Short Sale Hardship Letter

How to Write An Effective Naperville Short Sale Hardship Letter

A short sale happens when a homeowner sells his or her Naperville luxury home for less than what is owed on the mortgage. Short sales can save the seller from foreclosure and losing money because lenders don’t require the seller to pay the difference between what the selling price of the home is and the balance of the mortgage.

However, to qualify for a Naperville short sale, the seller must prove to the lender that they are going through a financial hardship.  The best way to do this is by writing a hardship letter.

What do lenders consider as a financial hardship?

• loss of employment or salary reduction
• relocation or job transfer
• death in the family
• major unexpected medical expenses
• divorce

Here are 8 tips on how to write an effective hardship letter:

1. The hardship letter must be signed and dated.
2. Include your Naperville home’s address and loan number in the header.
3. Keep it short and direct to the point. 5-10 sentences is enough.
4. State your financial hardship and the circumstances that make it impossible for you to continue your mortgage payments.
5. Make a strong case and make sure to let the lenders feel that there is nothing more you could do about your case and why it will be permanent.
6. Never blame your lender for your hardship.
7. End the letter with “a short sale seems to be the only solution for us to avoid foreclosure” or “please consider a short sale on our Naperville home since we can find no other solution to our circumstances.”
8. Don’t forget to sign and date it!

It is important to have an experienced Naperville short sale agent guide you through the short sale process and help you write a hardship letter that your lender will accept.

If you are ready to do a Naperville short sale call me,  Teresa Ryan at 630-276-7575. As a certified Short Sale agent and owner/broker of Ryan Hill Realty - www.RyanHillRealty.com, I have the experience and tools to help you sell your Naperville short sale home.

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Teresa Ryan

Broker/Owner, CDPE

Ryan Hill Realty

1001 E. Chicago Ave., Ste. 103

630-276-7575

TRyan@RyanHillRealty.com