It's tough to maintain it when you feel like the walls of your home are closing in around you, but you're not alone. Millions of homeowners think their American dream is slipping away because they assume that foreclosure is their only option. They're suspicious of people offering quick fixes-and rightly so. And, they simply feel trapped and embarrassed about their situation.

I want to reassure you that there's a credible, intelligent alternative to foreclosure that protects you, your credit, and your dream.

Call Steve Wilhelmy and his team (612-619-2638) to find out if a short sale is right for you. You will want Steve's experience and knowledge, communication, proven short sale track record, and post short sale guidance on rebuilding working for you!


What is a Short Sale?

The simple definition of a short sale is selling your home for less than what is owed for the property.  With a properly completed short sale transaction, the lender will write off the difference that is owed.  For example:


Purchase Price:          $230,000                                                              

Current Balance:        $218,500

Market Value:            $185,000

Equity:                   $ - 33,500                                                                

After paying for normal transaction fees and costs, if this family would sell their home via a traditional transaction, they would have to write a check to the mortgage company for almost $50,000

While this example is a common occurrence in the Minnesota Real Estate market, many home owners and many properties have different factors (second mortgage, tax liens, investment property, etc…) that will affect your personal situation.  To see if a short sale could help your financial situation, please contact Steve for a confidential conversation.
The Difference Between a Standard Sale and a Short Sale                  

While it might not be as dramatic as comparing apples and oranges, a short sale can be considerably more complex than a standard Real Estate sale.

In a standard Real Estate transaction, most people use the services of a Realtor® to help guide them through all the steps involved in the process. Here are some of the major areas:

  • Meet with Realtor® to understand goals and expectations
  • Prepare house for sale
  • Complete all legal documentation to sell home
  • Market house to attract qualified and interested buyers                       
  • Review and accept purchase agreement
  • Coordinate buyer’s inspection and appraisal
  • Complete all legal documentation prior to closing
  • Complete purchase transaction and issue funds to correct parties

When you are dealing with a short sale, you not only have to do all of the above steps, but there is an additional set of requirements that needs to be completed, such as:

  • Determine amount of all debts associated with property
  • Collect seller financial information
  • Summarize your hardship to your lender(s)
  • Calculate a proposed payoff to lender(s)
  • Follow up with lender(s) to verify transaction compliance
  • Work with lender(s) valuation company to get true and accurate value of property
  • Follow up with lender(s)
  • Work with mortgage insurance company or GSE to verify proposed payoff meets guidelines
  • Negotiate with buyer if bank rejects deal or makes counter offer
  • Provide all final documentation prior to lender(s) approving deal
  • Review approval letter for any special conditions and review letter with sellers

As you can see, while both standard sales and short sales are Real Estate transactions, they are different. If you are considering a short sale as an option instead of foreclosure, make sure the Real Estate team you choose understands the difference.

Steve and his team pride themselves on understanding the details of the complex short sale transaction and will use their experience and expertise to get the outcome their clients deserve.

Frequently Asked Questions

What are the qualifications for a Short Sale?

While each mortgage is different, the general qualifications are:

  • Owing more on your home than it is worth (negative equity)
  • Able to document an economic hardship (either reduction in income or increase in expenses)

What is Negative Equity?
Also known as being "upside down." Equity is the difference between the value of something and the outstanding portion of the loan taken out to pay for it. When what you owe is more than what it is worth, you have negative equity.

Why does my property have negative equity?
Here are a few common reasons:

  • You bought the home at the height of the market and the market has now declined.
  • Home was purchased with little or no money down and the owner wants to sell within a few years of purchase. The property value has not increased during that time.
  • Owner refinanced the home (with a high appraisal value) and now has little or no equity.

What if I owe what my home is worth?
Even if you owe exactly what your home is worth, you may still need to do a short sale in order to pay for the costs of the sale (Realtor fees, closing costs and escrow fees).

How much will the Short Sale cost me?
When selling your house, you normally pay for a Realtor to professionally market, negotiate and complete the transaction, as well as some normal closing and escrow costs. In the case of a short sale, those costs are almost always covered by the bank; so it usually does not cost you anything. If there are other unpaid liens such as past HOA dues or judgments, we will have a detailed confidential conversation about your specific situation and your options.

How will the Short Sale affect my credit? (compared w/ a foreclosure)
Credit ratings and scores are an ever-evolving process. When dealing with a short sale, the bank has the option of submitting to the credit bureau as "Paid in Full" or "Settled for less than full balance" status. As far as your credit score is concerned, there is no evidence to support that a short sale will lower your credit score. In many cases, your credit score was bruised if you were unable to make a mortgage payment and the bank reported that to the credit agencies.

When can I purchase a new home?
That will be specific to the current lending policies in regard to credit score, down-payment amounts and location of property. Currently, the Fannie Mae guidelines say you can qualify for a loan two years after a short sale (five years for a foreclosure), if you meet the other criteria. I can refer you to a good mortgage person that understands the most current mortgage policies and can advise you on the best way to qualify for a new mortgage in the shortest amount of time.

What about doing a loan modification instead of a Short Sale?
Most everybody desires to stay in their home. If you can afford to make your mortgage, property taxes and insurance payments, as well as all of your other financial obligations, then a loan modification might be right for you. I would suggest visiting the federal government web site to see if you qualify and what the next steps should be. Keep in mind with modifications, the banks can take a long time to make a decision and they may still continue the foreclosure process in the meantime. If you don’t qualify for a loan modification, we can then move forward with the short sale and still save your credit from a foreclosure.

Who benefits from the Short Sale?
Short sales are a win-win situation. Lenders win because they are able to get a majority of their money back and remove a “non-performing asset” off the books. Mortgagees win because they get the financial relief they need, are able to sell their property, and can avoid foreclosure.

I heard that a Short Sale is the same on my credit score as a Foreclosure.
The best way to answer that is with a simple “No.” Short sales are generally viewed by credit agencies as a method a person uses to work out their mortgage problem, while foreclosures are viewed as people walking away from the problem. That is probably one of the reasons why the Fannie Mae guidelines say people with a foreclosure on their record are not eligible for a new loan for a minimum of five years, while someone with a “Settled for less than full balance” status would be eligible for a new loan in two years.

Why would banks forgive the difference?
Banks view mortgages on a risk and return scale. They would prefer to get all the money they originally signed up for when they gave you the mortgage. However, if that is not going to happen, they want to get as much as they can for the mortgage in the shortest amount of time. If they have to take the house back through foreclosure, it will cost them more money and time, reducing the overall amount available to them (or their investors).

Can FHA, Conventional or VA loans receive a short sale?
Yes. Each of these different loan types can be negotiated in a short sale. Some loan types have different criteria, but all of them can be negotiated in a short sale.

Why not just let my lender foreclose?
NO! Foreclosure is a legal process. It involves attorneys and it costs MONEY. Once they get the property back via foreclosure, they must often sell it for MUCH LESS than market value and pay Realtor commissions and all customary closing costs. Doesn’t it make more sense for them to take at or a little below fair-market value before foreclosing?

What if I'm not behind on my payments?
Short sales work – even if you’ve never missed a payment! Short sales have a stigma only being available for folks who are in foreclosure. They just happen to be in a negative equity position and need the short sale in order to sell their home.

How long does a Short Sale take?
Short sale approvals can take 30 to 60 days or longer.

What if my home is already in foreclosure?
Your foreclosure sale will usually be suspended during the short sale process. That's why it's imperative that you contact me right away to find out if a short sale is a better option for your situation!