Short Sale Options
Everyday people ask me, “What can I do if I don’t have any equity in my home and I can’t afford the payments?”. Each family that I’ve been able to help avoid foreclosure is affected in such a profound way. And always at some point they make some kind of comment like I wish I had met you sooner and learned what my options were. Or I wish we hadn’t waited so long to get help.
I want you, your friends, family members, and neighbors to know that there are options and there is a way to get out from under your debt without bankruptcy or foreclosure. There 9 options outlined in my free short sale guide available at www.FreeShortSaleHotline.com
If you are wondering if a Short Sale could help you in your situation, don’t allow fear or uncertainty to paralyze you and stop you from looking into a solution that has worked and is working for others. The lending industry has never been more accommodating than right now for those in need.
What is a Short Sale?
A short sale is when lenders agree to accept less than the total amount due to them. Not all lenders will accept short sales and not all sellers or properties qualify for a short sale.
Lenders will weigh the net loss and gain and compare the net proceeds from a short with the net proceeds and loss from foreclosure. If it makes more financial sense to foreclose, lenders will opt to go through the foreclosure process.
If you are considering a short sale as a seller or buyer, there are significant potential impacts to consider. For your protection, I suggest that all sellers and buyers seek legal advice from a competent real estate lawyer and accountant to discuss short sale tax and legal ramifications.
As a real estate consultant, I am not a licensed attorney or a CPA and cannot offer legal, financial, or tax advice. Be aware the I.R.S. could consider debt forgiveness as income, and would therefore be taxable. And unless specifically agreed to there is no guarantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid.
How Do I Find Out If I Qualify for a Short Sale?
Each lender has their own requirements, but in general they will require the following:
Hardship Letter
Lenders usually require some explanation about how you got into your financial situation. There are several situations that clearly demonstrate to a lender that the borrower will be unable to avoid foreclosure. Those situations include loss of job, medical emergencies, divorce, military service or deployment, job relocation. Lenders will are not sympathetic to cases of fraud or criminal behavior.
Financial Statement
Lenders require a summary view of your financial condition which includes income, assets and expenses. Assets includes savings accounts, money market accounts, stocks, bonds, cash, and other real estate. If your financial picture shows you have assets to cover the debt, it is unlikely the lender will approve a short sale.
Copies of Bank Statements, Check Stubs, Tax ReturnsShort Sale Decisioning and Timeframe
Lenders need to validate the information you provide as accurate. They have a fiscal responsibility to ensure the hardship is valid and truthful. Your banking activity, income, and past records help the lenders complete their due diligence.
Letter of Authorization and Release
Lenders will not disclose or discuss personal information without written authorization from you. If you are working with a real estate consultant, negotiator, title company, or lawyer, you will need to write a letter to the lender giving the lender permission to talk your representatives about your loan. The letter should include the following:
• Property Address
• Loan Number
• Your Name
• The Date
• Your Agent's Name & Contact Information
Net Sheet (HUD-1)
This is an estimate of all the costs and how the proceeds will be distributed when the transaction closes. It will show the lender the sales price (if you have an offer from a buyer, if not it will be an estimated purchase price) closing costs, escrow and title fees, commissions, taxes, unpaid loan balances, outstanding payments due, and late fees. Your real estate consultant and escrow officer can prepare this for you.
Comparative Market Analysis
If you are unable to sell your home for enough to pay off the lender, due to a decline in property values, a comparative market analysis (CMA) will support that condition. Your real estate consultant can prepare a CMA for you, which will show prices of similar homes in your area including properties:
• Currently active on the market
• Pending sales (in escrow waiting to close)
• Solds from the past three months.
Purchase Agreement & Listing Agreement
When you have an executed purchase agreement with a qualified buyer, the lender will want a copy of the offer, a copy of your listing agreement, a copy of MLS listing and the buyer’s loan status report (Arizona’s loan pre-qualification form.) At this point the lenders will often negotiate a reduction in commissions, closing costs and other standard costs that seller may such as home inspection or warranty services.
Each potential short sale is reviewed on a case by case basis by the lender. all the items are properly submitted and the net to the lender from the short sale will be more than the net the lender through foreclosure, the lender should approve your short sale. As part of the negotiation, the lender may ask for additional cash or an unsecured note. You can ask that the lender not report adverse credit to the credit reporting agencies, however, the lender is under no obligation to do so.
The average time for a short sale from the time you first begin to market your property until the sale is completed is between 45 to 120 days. Contacting the lenders, preparing the documents for the short sale package, negotiating with the lien holders, marketing your property for sale, negotiating a purchase contract, and overseeing the hundreds of transactional details in a real estate sale transaction requires significant skill, time, and attention to details.
Most homeowners feel it is their best interest to delegate that task to someone they trust and respect that has the experience, skill, and focus to best represent their interests. Look for an experienced real estate consultant that has successfully completed short sales for other clients. Talk with those clients and ask them about their experience.
My purpose with all my clients is to make them so outrageously happy with the help I provide, that they will gladly introduce me to people they care about so they can receive the same high level of care and help buying or selling their homes.
