Short Sales

What is a Short Sale?

When the proceeds from the sale of your home are not enough to satisfy your obligations (mortgage balance, excise tax, real estate commissions, filing fees, title insurance, and any other selling expenses) it is called a short sale. A short sale can be beneficial for both the lender and the homeowner.

Here are a few scenerios where a short sale might occur.

Declining Market
Someone who purchased their home in the last year or two might find themselves in a short sale when trying to sell their homes in today’s declining market. They may have had a 100% loan, or perhaps taken out some of their home’s equity via a loan or second mortgage. In real estate terms, they are ‘upside down’ or they owe more that their home is worth.

Personal Difficulties
A home owner loses their job, gets behind on their payments, and find they cannot keep current. They bough the house a year ago, and financed the purchase with a 95% loan, and also financed the closing costs. They might consider foreclosure the only way out of the financial mess they are in. They are concerned that foreclosure will ruin their credit, or perhaps prevent them from buying another home in the future. For them, a short sale might make sense.

How does it benefit the lender?
Banks aren’t in the real estate business. To them, it costs time and money to deal with foreclosed properties.

How does it benefit the homeowner?
By avoiding the stigma of foreclosure, homeowners may be able to borrow money in the future, and eventually, own another home. For more information on how short sales and bankruptcy affect your credit worthiness, contact a Real Estate or Bankruptcy Attorney.

What will you need to start a short sale?

1) I will need a signed Authorization Form, so that I can set up the short sale file with your lender

2) I will need all your most recent loan statement, bank records, pay stubs, tax returns, and W-2's.

3) I will help you write a hardship letter, which describes the series of events that happened, and why you cannot keep your mortgage payments current.

4) I will prepare an up to date Comparative Market Analysis, to verify that your home has declined in value, and is not worth what is owed.

Once I have all this together, I will submit it to the lender's loss mitigation department. They will be making the final decision on any offers that come in for your property.

Note:
Before making any decisions on Short Sales, I recommend that homeowners talk to a qualified Bankruptcy Attorney about their options, and the possible ramifications on their credit record due to a short sale, foreclosure, or bankruptcy.

More info:

Business Week Article

WSJ Article

Realty Times Article