Short Sale

1) What is a Real Estate Short Sale?

.. A real estate short sale is when a mortgage lien-holder agrees to take a loss on the principle of their loan in order to allow the home to be sold for its current market value.

2) Who is eligible for a short sale?

.. Any borrower with a financial hardship that may lead to an unavoidable Foreclosure may be eligible for a short sale.  In some situations the borrower does not need to even be behind on mortgage payments to proceed with a short sale.

3) What are some of the seller benefits of a short sale? / Why should I sell my house via Short Sale?

.. With a Short sale, sellers avoid having to go through a lengthy foreclosure process and the stress of dealing with creditors. The foreclosure process has a greater impact on the borrowers credit score since more months of missed payments will have passed. While the reports on the effects of a foreclosure on credit vary, most agree that the deduction is between 200-300 points and stays on your report for around 7 years. Home loans, personal loans and car loans will become extremely difficult to obtain for many years and future interest rates can be very high. Even landlords today are running credit reports, making it even more difficult to secure a new place to live. In a Short Sale .. the property is sold, the debt is considered satisfied, and you can immediately begin rebuilding your credit. It will be possible to be eligible for another loan in as little as 2 years.. In the mean time you may still have the credit to satisfy a landlords credit check and the ability to explain that 'Yes I missed a few payments, but there was an unexpected hardship, I cooperated with the lender and together we made the best of the situation.' It says a lot and shows responsibility.

4) Do I have to pay taxes on the amount 'forgiven' in the short sale.

.. If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable. However, many may fall under an unearned income or other exclusion including The Mortgage Forgiveness Debt Relief Act of 2007 which generally allows taxpayers to exclude income from the discharge of debt on their principal residence upto $2M. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. It's recommended you discuss this with your tax adviser in advance.

5) Why do lien holders co-operate and allow short sales?

.. Lenders not only co-operate with short sales, they recommend them.  Banks are not in the business of owning real estate and they do not want your property (no matter how nice it is). In almost all cases a short sale will 'net' the lien holder(s) more money than foreclosing and selling it themselves.  This is because of the high costs associated with the foreclosure process.  Some of those costs to the lien holder are: taxes, missed insurance, court costs and filing fees, attorney fees, asset management costs, maintenance costs, repair costs, real estate commissions, in-house employee costs, closing cost, vandalism and the fact they become a motivated seller.

6) Who should negotiate my Short sale?

.. It is typically recommend that your Licensed Real Estate Agent with short sale experience lists, sells and negotiates the complete short sale package for the home owner. You're Agent should never charge a fee for the service unless they are a License Debt Negotiator. Third party Licensed Debt Negotiators, who charges a fee for their service, can also be utilized in situations your agent is inexperienced in short sales.

7) Who needs to approve a Short sale?

.. In all short sales, the home owner has the first right to refuse any purchase offer and/or terms provided by lien holders as to their acceptance of the short sale.  Junior liens such as 2nd mortgages and Condo fee liens also need to approve the short sale, while they are often the most stubborn and demanding.  Condo fees are always paid in full because the association depends on the money to survive and therefore their liens are legally placed before 1st mortgages and even property taxes.

8) How long does a Short Sale take to get approved?

.. Short sale approval time can vary from as little as 30-days to as long as 3-years or longer depending on several lien holder factors including: the efficiency of their short sale processes, their organization, their employee competency and the sheer number of short sales they are working on at any given time. The typical response time for a short sale approval in 2008-10 has been approximately 2 to 4 months (60-120 days).

9) What is involved in presenting a short sale to a lien holder?

.. Short sales have become so standardized in the banking industry that all lien holders request almost the same exact 'short sale package' consisting of solid records proving financial hardship. These documents are nearly the same documents required when originating a loan and proving its affordability and creditworthiness, but in this case it is just the opposite as to prove that the borrower in question is definitely unable to continue making mortgage payments and has no means to pay off the loan.  They understand a borrower in financial distress needs money to survive and they are not looking to take every last penny to their name, but at the same time they are expecting the borrower to pay off the lien if it is at all possible before they will consider taking a loss of tens or hundreds of thousands.

10) What documents does the lender need from me?

.. The typical financial hardship documents include: the banks short sale application, 2 months of most recent pay stubs, 2 months of most recent bank statements (all accounts), 2 years of most recent tax returns, and a financial worksheet of income and expenses.

11) What needs to be disclosed to buyers?

.. It must be disclosed to buyers that that the property for sale is a short sale because it needs to be understood and agreed upon by all parties that the sale is subject to 3rd party approval (the lien holders) and that may take 90-days or longer for that acceptance.

12) What happens if the bank denies the short sale?

.. If your short sale payoff is denied by any lien holder getting less than is owed to them, then the buyer has the option to increase their offer to satisfy the lien holder or the purchase offer will become void as per the short sale addendum 'short sale party approval' contingency.  At this point the property can be relisted in an effort to receive a higher offer.  Since the process has already been started, acceptance of a new offer can usually be much faster.  Original offers, or even lower offers in a declining market, can still be submitted down the road once the lien holders appraisal becomes outdated which is typically after 3 months.

13) What is Current Market Value?

.. Current Market Value is the price a buyer would be willing to pay for a home in today's market conditions. This method of valuing property is determined by recent area sales of similar style, size and amenities.

14) How much does a Short Sale cost?

.. There is no cost to pursue a short sale, and the lender almost always covers all the associated closing costs.

15) How does your company get paid to do a Short Sale?

.. We do not charge any fee or commission for assisting you with the short sale process/paperwork. We only get paid the traditional real estate commission upon the sale of your home.

16) What happens to the unpaid balance?

.. Most lender(s) will consider the debt settled and waive their right to pursue any remaining balance. The lender will issue a 1099 (gifted income) at the end of the year which you're tax preparer must include. You should discuss any tax implications with your tax advisor and ask about possible tax waivers like insolvency. We have not had a tax advisor recommend a foreclosure to a client over a short sale.

17) How long does a Short Sale take?

.. The timeline can fluxuate greatly. If everything goes our way, it can be as little as 3 months. If the bank gets a high appraisal and we can't get a matching offer, then it could take over a year.

18) What if I have IRS tax liens and/or credit card liens?

.. We can also remove IRS liens and credit card liens to allow the sale of the house. However, the IRS debt will still be owed.

19) Can I get money at the closing?

.. Most lenders will allow $3,000 for relocation assistance, and he have had several borrowers get over $20,000 (upto $35,000). This is however completely upto the lender. It is not a negotiation, they will notify us during the process if their is an incentive.

20) Should I move out right away?

.. No. A vacant property can sometimes disquality you for a short sale. Lenders expects the home owner to maintain the property (grass, snow, heat) during the sale process to fetch fair mark value. Also if a lender sees it is vacant, that gives them an easy opportunity to weigh the costs of a faster foreclosure without any eviction costs.

21) Do I have to miss a mortgage payment to qualify?

.. In many cases no. It's advised to pursue a Short Sale immediately upon determining that you will not be able to keep the house, now or in the future.

22) Why shouldn't I just let the house take the house in Foreclosure?

.. Foreclosure is the absolute worst outcome possible and can usually be avoided. Even after a foreclosure, the borrower still owes the bank for their loses and they will get a deficiency judgement to pursue ongoing collections. Many borrowers then file for bankruptcy. Foreclosure and Bankruptcy are the worst hits to your credit and will be on the report for 7+ years. There is a lot of stress that comes along with not being in command of the process and just waiting for the bank to take the house. Many people will live constant fear for years avoiding calls and door knockers. All of this can be avoided by taking action immediately with a cooperative Short Sale.

23) How much will the bank take?

.. At different times during the short sale process, the lender will send out an appraiser or real estate agent to value the property. This is often called a "BPO" or Broker Price Opinion. The timing of the BPO is critical for the success of your short sale. Once completed, this value is used by the lender to determine the property's Current Market Value and how much they will accept.

24) What is a Mortgage Deficiency?

.. A mortgage deficiency is when a bank/lender takes a loss on a mortgage loan. The deficiency is the difference between the total balance owed (including lay fees and missed mortgage payments) and the amount of money the lender 'nets' from the final sale of the property. This applies to foreclosure sales and short sales.

25) What is a Mortgage Deficiency Judgement?

.. A mortgage deficiency judgement is when the lender pursues the deficiency (see about) through legal means (i.e. court judgment) after the sale of the home.

26) What is the short sale process and procedure?

.. Most of the short sale process is very similar to a conventional real estate sale with the exception of the lenders discounted pay-off approval. Below is a generalize timeline of events from sellers first contact.

27) Can you guarantee to sell my home via Short Sale?

.. No. Not all lenders will offer to cooperate with a Short Sale. This is especially true when the borrower does not have a significant financial hardship to justify the Short Sale. In some cases, particularly with 2nd mortgages, the lien holder could request the home owner accept a promissory note to pay back some or all of the difference even after agreeing to the Short Sale. In this case the home owner could refuse the lenders terms of agreement and allow them to continue the foreclosure process.  Do realize though that a lien holder can still pursue a judgment to pay off the loan difference even after a home is foreclosed and/or sold at auction. In a Short Sale, it is up to your Short Sale agent to have the approval letter waive any rights to a future judgement.

SHORT SALE EXPERIENCE:
· 15+ Years Selling/Negotiaing Short Sales
· 50+ Completed Short Sales

QUALIFICATIONS:
· Exceptional Technology & Computer Skills
· Easily Accessible via Email, Text and Phone
· Competent, Ethical, and Trustworthy
· Professional Real Estate Photographer

INSURANCES:
· Errors & Emissions (E&O)
· General Liability

1) Seller - Behind on a mortgage payment or foresees an inevitable missed payment in the near future.

2) Seller - Contacts bank to notify of financial hardship.

3) Bank - Collects sellers financial information to determine if eligible for Loan Modification.

4) Bank - If Loan modification is denied, Lender recommends the home sold as a short sale.

5) Seller - Finds a local Realtor (real estate agent) with experience in short sales.

6) Realtor - Lists Home for sale at Current Market Value

7) Realtor - Home is marketed and sold conventionally, but with notice of Short Sale contingency.

8) Seller - Accepts best offer that comes close to Current Market Value. (typically within 20%)

9) Buyer - Agrees (in writing) to wait a minimum 90 days for short sale approval.

10) Realtor - Deposit Check is collected from the buyer and home is no longer shown.

11) Seller - Provides Financial Hardship Documents to Realtor.

12) Realtor - Submits Offer and Financial Hardship Documents to the Lien Holders for short sale approval.

13) Bank - Orders and pays for an Interior BPO Valuation.

14) Realtor - Provides BPO agent access to property and discloses known property defects.

15) Bank - Accepts or Counters (the pay off amount) based on the BPO Value.

16) Realtor - If bank counters: Submits new counter offer to buyer based on banks required 'net' pay-off.

17) Buyer - If bank counters: Accepts or Counters the Sellers short sale counter offer.

18) - Counters can go back and forth as usual. Bank is requesting a 'net' pay-off, and Realtor is countering a value that will 'net' the bank that value after all closing costs are deducted.

19) Bank - Bank accepts the offer and provides a Short Sale Approval Letter.

20) - In some cases, Bank may request Seller hold a loan a portion of deficiency or maintains right for a Deficiency Judgment.

21) Realtor - Demands bank include a waiver of future deficiency judgement and removal of loan payback.

22) Seller - Chooses to accept or decline final terms of the Short Sale Approval.

- The Mortgage Forgiveness Debt Relief Act

- Home Affordable Foreclosure Alternatives (HAFA)

- Making Home Affordable

- HUD > Avoiding Foreclosure