Short Sale Basics
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| Rob Turney |
| 702-336-8595 |
A short sale is a sale where the net proceeds from the sale won't cover your total mortgage obligation and closing costs, and you
don't have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender
takes title of your home sometimes through a lengthy legal process or if there is an acceleration clause in your loan contract, as
soon as 90 days from a notice of default through a foreclosure sale.
Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short
sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification
such as: Refinancing your loan at a lower interest rate; providing a different payment plan to help you get caught up; or providing a
forbearance period if your situation is temporary. When a loan modification still isn’t enough to relieve your financial problems, a
short sale could be your best option.
A short sale is very similar to a normal sale, but in addition to a buyer and a seller coming to terms on the sales price and conditions
of the sale, it also requires the institution that holds the mortgage on your home to approve of the sale as well. This sounds very
simple on the surface, but the institution that now "services" your mortgage, (collects your payment, pays the taxes and insurance)
will want to make sure that the sale is legitimate and the sales price is at market value. Because of this quite a bit of extra
paperwork and time is required to navigate the short sale process. Additionally, you may be asked by your lender to sign a
promissory note agreeing to pay back the amount of your loan not paid off by the short sale, but ideally we negotiate for a FULL
RELEASE OF LIEN, meaning you walk away with no more obligation.
Why would a lending institution want to do a short sale?
When a bank forecloses on a property, it costs them money, as well as additional time. A good percentage of the time, the home
is left vacant, the grass and trees die from lack of water and the home can be vandalized, with everything from appliances to
entire air conditioning systems being stolen, again making it harder to sell the home for market value. If someone is still living
in the home, it will generally be maintained and can be sold quicker for top dollar.
Why would an owner want to do a short sale?
When a property owner goes through a foreclosure, or bankruptcy, their credit history will reflect the derogatory remarks from
those and they will be unable to qualify for another mortgage loan for several years, as well as increasing the interest rates on
things like auto loans or credit cards. A short sale is reflected on a credit history and will have adverse affects by lowering
FICO scores, but with proper credit use and staying current on rent and bills, those FICO scores can be restored and you may
be back in a position to become a home owner in as little as 12 months in some cases. Also in certain situations, the buyer of
a short sale, may be an investor that would be willing to rent the home back to you while you get back on your feet.
Will you receive any money from the sale?
No, any monies beyond closing costs will go to the institution forgiving the debt.
What is the short sale process?
First we will need to find out the value of your home based on sold comparable properties and list it in the multiple listing
service. Then we will need to notify your lien holders, (the mortgage company or companies if you have more than one loan)
that you are pursuing a short sale and that you have authorized them to communicate with me, your Realtor. Once that line of
communication is opened, I will submit your short sale package to the lien holders and the short sale process will officially be
underway.
What is in a short sale package?
Each institution has their own specific needs, but generally what we will provide them with is;
Realtor authorization form (this allows me to communicate with them about the sale)
Listing agreement (shows them that you are really pursuing the sale)
MLS print out (shows the listed price of the home)
Hardship letter (describes the reasons why you are unable to fulfill your obligations to the lien holder)
Financial Worksheet (lists all of your assets and debts along with your monthly costs)
Two months bank statements (this is to verify your income and payouts)
Two years tax returns (again to verify income)
Purchase Contract (this is submitted once an actual offer comes in on the home)
Preliminary HUD 1 (this is created by the title/escrow company that will be processing the purchase)
Where do I find all of those forms?
That is why you've hired me, I will provide you with the financial worksheet and help you in structuring your hardship letter
to accurately reflect the situation you are in. Once we've compiled all of the forms, I digitize them and forward them to the
assigned negotiator for your short sale.
You will need to be prepared for a lengthy sales process and we have to ensure that the buyer understands that short sales can
take as long as 6 months to a year to complete. Some experts estimate the average time to complete a short sale are as follows;
If you have only one mortgage, the review can take about two months.
With a first and second mortgage with the same lender, the review can take about three months.
With two or more mortgages with different lenders, it can take four months or longer.
When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can
lengthen the process or put you back at square one.
So now what do I do?
First talk to your institutions loss mitigation department, and explain your situation. Call the main number for your institution that
appears on your monthly statements and ask for the LOSS MITIGATION DEPARTMENT. If it doesn't look like they will be able to
reduce your payments enough to make a difference, then call me at 702-336-8595 or send me an email by clicking on this link.
What if we can't rent our old home?
While there are many occasions, that a seller has been able to rent the home they sold, more often than not, we will need to find
you a rental property to live in while you restore your credit. Once we have a solid target date to close escrow on your existing
home, we will begin looking for a rental property for you to move into.
Please feel free to call me and I will be more than happy to answer any questions you might have. Remember help is available, so
don't let yourself be pulled under!
don't have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender
takes title of your home sometimes through a lengthy legal process or if there is an acceleration clause in your loan contract, as
soon as 90 days from a notice of default through a foreclosure sale.
Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short
sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification
such as: Refinancing your loan at a lower interest rate; providing a different payment plan to help you get caught up; or providing a
forbearance period if your situation is temporary. When a loan modification still isn’t enough to relieve your financial problems, a
short sale could be your best option.
A short sale is very similar to a normal sale, but in addition to a buyer and a seller coming to terms on the sales price and conditions
of the sale, it also requires the institution that holds the mortgage on your home to approve of the sale as well. This sounds very
simple on the surface, but the institution that now "services" your mortgage, (collects your payment, pays the taxes and insurance)
will want to make sure that the sale is legitimate and the sales price is at market value. Because of this quite a bit of extra
paperwork and time is required to navigate the short sale process. Additionally, you may be asked by your lender to sign a
promissory note agreeing to pay back the amount of your loan not paid off by the short sale, but ideally we negotiate for a FULL
RELEASE OF LIEN, meaning you walk away with no more obligation.
Why would a lending institution want to do a short sale?
When a bank forecloses on a property, it costs them money, as well as additional time. A good percentage of the time, the home
is left vacant, the grass and trees die from lack of water and the home can be vandalized, with everything from appliances to
entire air conditioning systems being stolen, again making it harder to sell the home for market value. If someone is still living
in the home, it will generally be maintained and can be sold quicker for top dollar.
Why would an owner want to do a short sale?
When a property owner goes through a foreclosure, or bankruptcy, their credit history will reflect the derogatory remarks from
those and they will be unable to qualify for another mortgage loan for several years, as well as increasing the interest rates on
things like auto loans or credit cards. A short sale is reflected on a credit history and will have adverse affects by lowering
FICO scores, but with proper credit use and staying current on rent and bills, those FICO scores can be restored and you may
be back in a position to become a home owner in as little as 12 months in some cases. Also in certain situations, the buyer of
a short sale, may be an investor that would be willing to rent the home back to you while you get back on your feet.
Will you receive any money from the sale?
No, any monies beyond closing costs will go to the institution forgiving the debt.
What is the short sale process?
First we will need to find out the value of your home based on sold comparable properties and list it in the multiple listing
service. Then we will need to notify your lien holders, (the mortgage company or companies if you have more than one loan)
that you are pursuing a short sale and that you have authorized them to communicate with me, your Realtor. Once that line of
communication is opened, I will submit your short sale package to the lien holders and the short sale process will officially be
underway.
What is in a short sale package?
Each institution has their own specific needs, but generally what we will provide them with is;
Realtor authorization form (this allows me to communicate with them about the sale)
Listing agreement (shows them that you are really pursuing the sale)
MLS print out (shows the listed price of the home)
Hardship letter (describes the reasons why you are unable to fulfill your obligations to the lien holder)
Financial Worksheet (lists all of your assets and debts along with your monthly costs)
Two months bank statements (this is to verify your income and payouts)
Two years tax returns (again to verify income)
Purchase Contract (this is submitted once an actual offer comes in on the home)
Preliminary HUD 1 (this is created by the title/escrow company that will be processing the purchase)
Where do I find all of those forms?
That is why you've hired me, I will provide you with the financial worksheet and help you in structuring your hardship letter
to accurately reflect the situation you are in. Once we've compiled all of the forms, I digitize them and forward them to the
assigned negotiator for your short sale.
You will need to be prepared for a lengthy sales process and we have to ensure that the buyer understands that short sales can
take as long as 6 months to a year to complete. Some experts estimate the average time to complete a short sale are as follows;
If you have only one mortgage, the review can take about two months.
With a first and second mortgage with the same lender, the review can take about three months.
With two or more mortgages with different lenders, it can take four months or longer.
When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can
lengthen the process or put you back at square one.
So now what do I do?
First talk to your institutions loss mitigation department, and explain your situation. Call the main number for your institution that
appears on your monthly statements and ask for the LOSS MITIGATION DEPARTMENT. If it doesn't look like they will be able to
reduce your payments enough to make a difference, then call me at 702-336-8595 or send me an email by clicking on this link.
What if we can't rent our old home?
While there are many occasions, that a seller has been able to rent the home they sold, more often than not, we will need to find
you a rental property to live in while you restore your credit. Once we have a solid target date to close escrow on your existing
home, we will begin looking for a rental property for you to move into.
Please feel free to call me and I will be more than happy to answer any questions you might have. Remember help is available, so
don't let yourself be pulled under!
| Consumer Credit Counseling Service is a non-profit NFCC member United Way Agency that offers free financial consumer credit counseling and credit education. |
| Homeownership Preservation Foundation: Develops innovative solutions for preserving homeownership by partnering with consumers and the mortgage lending industry |
| The Women’s Development Center first opened its doors in 1990, bringing a new era of hope, support, and opportunity to economically disadvantaged women and children in southern Nevada |
| DON'T PANIC! You have options that you may not have explored! If you feel like your home is dragging you under, a loan modification or a short sale may be exactly what you need to get your head back above water. The key to surviving is to be PRO ACTIVE! Call your lender and ask to speak to their LOSS MITIGATION department and let them know you are having trouble. The may suggest a loan mod or a short sale. The links directly below will lead you to three non profit organizations that specialize in helping people just like you. Below that is a detailed explanation of Short Sales and benefits they provide that foreclosure and bankruptcy don't. |