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A short sale occurs when an offer is made on a property that is less than what is owed on it. The lender may release the lien that is secured to the property upon receipt of less money than is actually owed. A common occurance is in the event that the seller is unable to make payments and receives a Default Property Notice.
In short, if the unpaid balance of a loan is $100,000 and the property sells for $90,000 under a short sale the lender might accept $90,000 as payment in full.
Who Qualifies for a Short Sale?
Typically, the mortgage lenders will only accept a real estate short sale if the borrower is at least one month behind on the mortgage payments, has a ready willing and able buyer, and is unable to service all the debt and liabilities. If the borrower´s financial situation has changed due to reduced wages, loss of job, divorce or financial hardship, he would most likely qualify for a real estate short sale. The ability to provide documentation of the current financial situation is extremely important and will need to be provided.
What is Required?
- Call the lenders; request a supervisor who can discuss and make decisions on a short sale.
- Submit a Letter of Authorization, which will allow the lender to speak with specific interested parties regarding the loan. The letter should include property address, loan reference number, borrower´s name, the date, the name of the borrower´s real estate agent and contact information. Many banks require that their forms be used.
- Preliminary net sheet with an estimated closing statement. The real estate agent can prepare this if borrower is unsure how to complete.
- A hardship letter with a statement of the facts describing how the borrower´s financial hardship came about.
- Proof of income and assets, disclosure of finances including savings, cash, money market accounts, stocks and bonds, negotiable instruments, real estate, or any item with tangible worth.
- Copies of six months bank statements, borrower may need to explain certain activities such as large cash withdrawals, unaccountable deposits, or unusually large quantities of checks.
- A comparative market analysis (CMA) to substantiate a market decline or reduction in property value that may be partially or wholly to blame for borrower´s inability to sell the property. A realtor can prepare a CMA on behalf of the borrower.
- The lender will require a copy of borrower´s listing agreement and a copy of the prospective buyer´s purchase agreement.
The borrower should be aware that the I.R.S. considers forgiveness of debt as income.
The above is for information purposes only and should not be considered as advice.
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Educate Yourself and Don't Get Ripped Off!
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Why Isn't This a Scam?
At this point you are probably asking yourself "if this isn't a scam why are you willing to do this for me?" The answer is that we sell houses for Sellers, and to Buyers. That's it! During this process you may determine, like many others in your situation, that a Short Sale is your best option. This can be done with ZERO COST and NO FEES to you. Even if your home is worth less than you owe. In fact on May 19, 2009 the Obama administration passed legislation designed to make Short Sales easier to do.
The best thing of all is that Fannie Mae guidelines state clearly that, for future home purchases, a Short Sale is much better than a foreclosure. The copy of the guideline is available above. Yes, with a Short Sale you could be buying a home again in as little as two (2) years.
The decision is yours. Doing nothing could be your biggest mistake. If you call, we will gladly meet with you to go over some of your options and possibly even develop a backup plan. There is no charge for the consultation. Just call, we can help! |