YOU MAY BE FACING A
SHORT SALE SITUATION!
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While it is a stressful decision for many families, a short sale may be the best solution, short of foreclosure, for homeowners who owe more on their properties than they are worth.
Technically, a homeowner is ‘short’ when the outstanding loan is more than the current market value of the property. A short sale occurs when the homeowner finds a wiling buyer and then negotiates with the lender to accept less than the full balance of the loan at closing (typically to avoid foreclosure). Once the buyer closes on the property, the property is considered ‘sold short’ of the total value of the loan. The procedure requires stamina but it can yield favourable results for all. Organization and full disclosure will also help you manage through the process.
In the past it was rare for lenders to accept short sale proposals. With overwhelming market shifts, and changes in corporate policy, lenders have become much more willing to work with homeowners in distress, and since a short sale generally costs the lender less than a foreclosure, it can also be a way for the lender to reduce their losses.
To qualify for a short sale, homeowners must prove one or more of the following circumstances:
A situation is causing the borrower to have trouble affording their mortgage.
Monthly Income Shortfall
Basically the borrower has more expenses than income, which will, or already is, preventing them from affording their mortgage.
The borrower does not have significant liquid assets to allow them to pay down their delinquent mortgage.
Working with Representation
This is a complex transaction, and if short sale is an option you are considering, an experienced REALTOR® can certainly help you make the best of this situation. When interviewing potential agents, be sure to inquire about their experience with short sales and find out if they hold any designations for buying and selling distressed properties.
It is also recommended that you obtain legal advice from an experienced real estate lawyer and discuss short sale tax ramifications with your accountant. If you do not know any of these professionals, your REALTOR® can recommend experts in these fields.
Selling Your Property as a Short Sale
If you have determined that a short sale is right for your situation, you need to initiate the process with your lender.
Note: Keep good records! Document all calls and keep photocopies of everything you send to the lender. With so many properties in distress, it is not uncommon for the lender to misplace your file.
Lenders typically have their own pre-determined requirements for short sale application, and may demand a wide array of documentation from homeowners; however, the following steps should give you an idea of the general expectations:
Call the Lender
It may take several phone calls for you to reach the person responsible for handling short sales. Be sure to request the supervisor or manager who can make a decision on your account. They will most likely guide you to their website for a short sale application.
Your lender package may need to include the following:
- Real estate commissions
- Unpaid loan balances
- Outstanding payments due, including late fees
- Title Fees
- Savings accounts
- Money market accounts
- Stocks and bonds
- Negotiable instruments
- Other real estate property
- Items with tangible value
This is a statement of facts, which describes how your financial hardship came about. It makes a plea to the lender to accept the terms of a short sale on your account. Things that might qualify as a hardship include: job loss or reduction in pay, disability, and personal loss. Lenders are not typically empathetic to situations involving dishonesty or criminal behavior.
Preliminary Net Sheet
This is an estimate of the total closing costs which should include:
Sales price you expect to receive, or the actual offer you have received … PLUS
All costs of sale
Submit Letter of Authorization
Lenders will not disclose any of your personal information without written authorization to do so. If you are working with a REALTOR®, lawyer, and/or accountant, you will receive better cooperation by submitting a written consent to the lender, granting them permission to discuss your loan with those interested parties.
Proof of Income & Assets
Always be honest and upfront about your financial situation, disclosing any and all assets.
Copies of Bank Statements
Explain any unaccountable deposits, large cash withdrawals or unusual checks.
Comparative Market Analysis
A comparative market analysis (CMA) will help the lender evaluate why you cannot sell your property for what you owe on your outstanding loan. Your REALTOR® can prepare a CMA for you, which will show prices of similar local homes that have typically sold within the last six months.
Listing Agreement & Purchase Agreement
If you accept an offer to buy from a prospective purchaser, the lender will require a copy of the offer, along with a copy of your listing agreement. It is important to note that all offers are ‘subject to lender approval’. The lender may renegotiate commissions and can refuse to pay for home protection plans and/or termite inspections. Since a majority of short sales are “as is” transactions, the lender will also likely refuse contingencies for repair and requested credits.
It is important to understand that a short sale can damage your credit score, often appearing as a “settlement” which indicates that you paid less than you owed. As part of the short sale negotiation, you should request that the lender not report adverse credit activity to the credit agencies. Even though the lender is under no obligation to accommodate this request, they may be willing to work with you to minimize your financial damage. You could also be presented with a tax bill for the unpaid debt, which is generally considered as debt forgiveness, or income to you.
A team of professionals may be able to avoid or, at the least, minimize these consequences. Please consult and seek professional help with an experienced REALTOR®, attorney and/or accountants.
There Are Several Options To Foreclosure!
… And thankfully there are options available to you if you are looking to stay in your home.
The most popular program, a Loan Modification is a change to an existing loan to a more affordable level by a lender in response to a borrower’s long-term inability to repay it. Loan modifications typically involve a reduction in the principal balance, interest rate or an extension of the length of the term of the loan, or a combination of the three. You may qualify if you have recovered from a hardship and can afford the new payment amount. Most lenders can work with home owners, even if they have poor credit and have a foreclosure date since they do not want your home.
Depending on your situation, your bank may offer you a solution to repay your missed payments and avoid foreclosure with a Mortgage Forbearance Agreement. This agreement is made between a mortgage lender and delinquent borrower in which the lender agrees not to exercise its legal right to foreclose on a mortgage and the borrower agrees to a mortgage plan that will, over a certain time period, bring the borrower current on their payments. A Mortgage Forbearance Agreement is a temporary solution for delinquent borrowers designed for borrowers who have short-term financial problems caused by an unforeseen hardship such as health problems or unemployment. Usually Mortgage Forbearance Agreements allow a minimum of 4 months to postpone monthly mortgage payments, all the way up to 12 monthly payments at the maximum.
A Principal Reduction is a process whereby your loan modification attorney assists in negotiating down the total amount of the principal that you owe on the loan to reflect current value of the property. Usually the interest rate is reduced to current market rates and your monthly mortgage payment is lower.
However a Principal Reduction is difficult because the bank or lender is not making as much profit, and may even avoid mentioning principal reduction as an option. Just a $200 a month reduction equals tens of thousands of dollars less profit for the bank over the life of the mortgage.
This information is meant as a guide. Although deemed reliable, information may not be accurate for your specific market or property type. Please consult a REALTOR® professional for more information on making a written offer.
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THE TIME IS NOW!
I could write a book on all the things there is o know about how to perform a Short Sale, but the simple truth is what you need most right now is someone that is knowledgeable to help you get through it and that knows how to negotiate hard and get the job done correctly! So what’s next …
Contact me right away … there is absolutely no reason for you to sit and wait while this situation grows worse … Let Me Help With My FREE Short Sale Evaluation!
Once we’ve done the evaluation, we’ll sit down I will go over everything you’ll need to do in order to get us started and get your lender to recognize that you are willing to take charge of the problem. It is very important that they see you as someone being willing to work out the debt. It might be we are able to resolve your situation without selling your home at all for now!
Let me take care of the rest … just be available when we need to submit paperwork and I will do the rest of the heavy lifting!
ARE YOU READY TO GET STARTED?
Let’s get started right now and let me help you to get your home on the market so we can get it under contract and on its way to being SOLD! Remember the banks will take your home like the thousands of others and a short sale is much better then a foreclosure when it comes to you recovering your life.
I promise to provide you the greatest service you will ever know and absorb most of the headaches of the selling process. Just simply fill in the confidential form below and let’s get started today! Thank you for choosing MORE Realty Services LLC.
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We look forward to serving you and becoming the company of choice in your future. Thank you.
Donald E. Johnson
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“Persistence! Nothing in the world can take the place of persistence. Talent will not; Nothing is more common then unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent.” ~ Calvin Coolidge
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Disclaimer: I am not attorney, nothing here is presented or represented to be legal or financial advice. If you are in need of an attorney please seek competent legal counsel, (I recommend one that practices real estate law), as well you should seek a qualified accountant regarding any tax, income or other financial advise prior to making any decisions that can or could affect your financial situation.