Short Sales

 SHORT SALES....SHORT SALES....FORECLOSURES.....FORECLOSURES

How many times a day do you hear these words?  Do you think that all the homes being sold these days fall into one of the two types?  Do you really understand the difference between a short sale and a foreclosure?  Well if you are like most people, confusion exists. 

With the reality of very difficult economic times, far too many homeowners are facing the harsh reality that making their normal monthly mortgage payment is going beyond their financial capability.  For whatever reason, the homeowner is facing loosing a home in a manner that destroys credit, embarrasses the family, and strips the owner of their dignity.  The result is that the homeowner who can not afford to keep mortgage payments current is going to have to consider a foreclosure or a short sales.  These are situations where the value of the home is less than the amount due on the mortgage...or, being upside down.

It is not my intent to advise as to whether the homeowner should be going thru foreclosure or a short sale.  That is a decision that need to be made by the homeowner with their lawyer or accountant.  Each has impact on the owner's credit rating and how quickly the owner will be able to purchase another home. 

The concentration, here, will be to discuss "SHORT SALES" as to the processes required to achieve fulfillment.  It is not intended to answer all questions nor to take away from the advice that I or your agent will provide. 

SO WHAT IS A SHORT SALE?

A short sale is not always a pleasant transaction for the reasons that I mentioned previously.  But, it does provide an alternative to a foreclosure and has less impact on your credit rating and/or your ability to purchase another home in the future. 

When lenders agreed to a do a short sale, it means that the lender is accepting less than the total amount due.  However, not all lenders will accept a short sale or discounted payoffs, especially if makes more sense to foreclose.  Also, not all sellers nor all properties qualify for a short sale.  Generally, however, a short sale is less costly to a lender than a foreclosure.

Another factor is that the difference between what the homeowner owes on his mortgage and the final net selling price of the home may be treated and taxable as income by the I.R.S.  Also, there is no guarantee that the lender who accepts a short sale will not legally pursue the borrower for the difference.  This is another reason that you need to see a lawyer who can determine whether your loan qualifies for a deficiency judgment or claim.

For a lender, the advantage of a short sale is that the lender will take less of a "hit" from a short sale as opposed to a foreclosure.  Foreclosures take more time and are more likely to cause deterioration to neighboring residences.  Thus, those homes values are less affected in their value.

SO WHO PARTICIPATES IN A SHORT SALE?

•  The Seller is the borrower who needs to sell his property.
•  Real-estate agents including the listing agent who helps the seller sell the property
•  Servicers
•  Other lien holders

SO WHAT IS THE PROCESS?         

• Call the lender to find the supervisor's name who is capable of making a decision.  You don't want to talk to the work-out department or the short sale department.
• Assemble and submit the short sale package.  Submit letter of authorization as lenders do not want to disclose any of your personal information without written authorizations.  Also, authorize the lender to talk to your representative -- real estate agent, closing agent, title company, or lawyer.
• Submit a preliminary net sheet.  This is an estimated closing statement that shows the sale price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any.  Your lawyer or your real estate agent can prepare this information for you  
• Submit a hardship letter which describes how you got into this financial bind.  You want to make a plea to the lender to accept less than full payment.  
• You need to submit proof of income and assets.  Lenders will require assurance that the debtor cannot pay back any of the debt that is forgiving.
• You need to submit copies of bank statements.  Unusual items will need to be explained especially deposits.\
• Comparative Market Analysis.  The analysis can be prepared by your real estate agent.  The purpose is to statistically indicate that the value of the home has been negatively affected by the value of homes sold within the last six months in the immediate area of the home.  The report will also show prices of similar homes that are currently active on the market and/or pending.
• The real estate agent needs to list the property on the MLS.  Generally, the listing will identify the property as a short sale offer and request the use of a Special Sale Contract.  Hopefully, the agent and the homeowner will be very realistic in pricing the home and that the marketing will be very aggressive in the light of current market conditions.
• When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement.  The lender may want to renegotiate commissions and to refuse to pay for certain items such as termite inspections and/or home warranty protection plans. 
• The servicer also has to work with Fannie Mae who uses a BPO to generate a minimum acceptable price.   Some servicers are authorized to approve short sales on Fannie Mae's behalf; others will need to obtain approval first. 
• Also, once the short sale has been approved, the seller may ask the lending institution to not report adverse credit to the credit reporting agencies.  Hower, the lender is under no obligation to comply. 

HAVE ANY QUESTIONS? ... NEED HELP? ... GIVE ME A CALL AT 314-570-5125

Ron Gorman, Realtor Coldwell Banker Gundaker St. Louis Office 4320 Hampton Ave  St. Louis, MO  63109 Office: (314) 351-6005 Cell: (314) 570-5125 Fax: (314) 667-3016 Contact Me