Do YOU Need a Short Sale Realtor? Short Sale FAQ's
Learn how to avoid foreclosure with a Short Sale Realtor
What is a Short Sale?
Do I need A Realtor to do a Short Sale?
What does my Realtor need from me to do a Short Sale?
What does a Short Sale cost?
How long does it take to process a Short Sale?
Will a Short Sale affect my credit?
What are the tax consequenses of doing a Short Sale?
What is a short sale?
A Short Sale is when the lender accepts less than what is owed on the sale of real estate. You may be able to AVOID FORECLOSURE WITH A SHORT SALE. In the past a lender usually would not consider a short sale unless the homeowner was behind in their mortgage payment at least 30 days*. But times have changed, and with the recent flood of foreclosures on the market, some lenders are willing to at least look at the hardship the owner is experiencing when asked to consider a short sale. Needless to say, not all short sales are accepted and foreclosure may ultimately result.
A homeowner will benefit by using an experienced Realtor because working a short sale is a long and tedious ordeal with many hours on the phone, much documentation to submit and many times for naught. A seasoned short sale Realtor networks with other short sale Realtors who share names of decision makers and it would be in your best interest to use one. In the past a lender usually would not consider a short sale unless the homeowner was behind in their mortgage payment at least 30 days. But times have changed, and with the recent flood of foreclosures on the market, some lenders are willing to at least look at the hardship the owner is experiencing when asked to consider a short sale. Needless to say, not all short sales are accepted and foreclosure may untimately result. What does my Realtor need from me to do a Short Sale? - LOSS MITIGATION DEPT. - Call you lender and ask for the LOSS MITIGATION Department. Let them know that you are trying to sell your home and you need a SHORT SALE PACKET mailed to your residence.
- SHORT SALE PACKET - This Short Sale packet will list the documents needed by the lender and the instructions to proceed.
- SHORT SALE PACKET INSTRUCTIONS - You will want to let your Realtor see this packet in order to move forward as lenders may differ in their procedures.
- LETTER OF AUTHORIZATION – This will give the lender permission to speak to your Realtor or other representative. It will be faxed and MUST be followed up with a phone call to confirm because lenders are receiving mass emails by FAX and it will remain on the computer unattended until they receive your follow-up phone call. After 30 days it will be deleted if not confirmed. Letter of Authorization requires the following:
- Property Address
- Loan Number
- Owner’s Name(s)
- Owner’s Social Security No(s).
- Owner’s Phone No.
- Current Loan Balance - Obtain the balance on your first (& second note if applicable) from your lender or foreclosure attorney.
- LISTING AGREEMENT - Your 6 month listing agreement with your Realtor.
- PRELIMINARY NET SHEET – Your Realtor can obtain this from the Title Company.
- HARDSHIP LETTER – A handwritten letter is preferable to typewritten and it should state your complete situation.
- FINANCIAL WORKSHEET – All of your debts, savings, assets, and income.
- COPIES OF BANK STATEMENTS – At least 2 month.
- COMPARATIVE MARKET ANALYSIS – Your Realtor will obtain this from the MLS (multiple listing service)
- PURCHASE AGREEMENT – Hopefully, you have a contract on your house. Don’t turn down a low-ball offer. Send it in. It will probably be denied but it is the only way to obtain the amount the lender is willing to take.
- MLS PRINTOUT - This MLS printout will show the original list price and the reduction taken if listed for over 2 weeks.
What does it cost?
It costs the homeowner nothing except a glitch on their credit. And the homeowner can make nothing on the sale. Beware of some recent companies offering help with short sales requiring money up front. Some tax consequences may apply. Also, there is no guarantee that a lender will not legally pursue a borrower for the difference between the amount owed and the amount paid. You may want to consult your attorney. How long does it take?
Rarely can a short sale be completed in 30 days. Normally, it takes up to 4 months, possibly longer. Be sure that your Buyer is prepared to wait that long. Few buyers have the patience to wait so ALWAYS accept backup offers. Does it affect my credit?
Yes, it can and usually does but not as bad as foreclosure. Are there tax consequences?
Ask your accountant but be aware that IRS could consider debt forgiveness as income. Ask your attorney if the Mortgage Forgiveness Debt Relief Act of 2007 applies to you. Here is a summary of the requirements for an FHA-insured Short Sale: - The borrower must be delinquent at least 3 months.
- Net proceeds of the offer should be at least 82% of appraised value.
- The appraised value should be at least 63% of the mortgage.
- The mortgagor must be an owner-occupant.
- There is verification of the borrower's decrease in income showing inability to pay the mortgage.
- The property was marketed in such a manner that an offer for fair market value could be obtained.
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