Short Sale in Real Estate:

There are many ways to lose a home but signing away ownership in a manner that destroys credit, embarrasses the family and strips an owner of dignity is one of the hardest. For owners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or foreclosure proceedings. One of those options is called a “short sale.” Click Here for a Complete Step-by-Step Short Sale Guide

When lenders agree to do a short sale in real estate, it means the lender is accepting less than the total amount due. Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose; moreover, not all sellers nor all properties qualify for short sales.

If you are considering buying a short sale, there could be drawbacks.

For your protection, I suggest that all borrowers:

• Obtain legal advice from a competent real estate lawyer
  
• Call an accountant to discuss short sale tax ramifications
  

As a real estate agent, I am not licensed as a lawyer nor a CPA and cannot advise on those consequences. Except for certain conditions pursuant to the

Mortgage Forgiveness Debt Relief Act of 2007, be aware the I.R.S. will consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid. In some states, this amount is known as a deficiency. A lawyer can determine whether your loan qualifies for a deficiency judgment or claim.

Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect.

• Call the Lender
  You may need to make a half dozen phone calls before you find the person responsible for handling short sales. You do not want to talk to the “real estate short sale” or “work out” department, you want the supervisor’s name, the name of the individual capable of making a decision.
  
• Submit Letter of Authorization
  Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan. The letter should include the following:
  
  • Property Address
    
  • Loan Reference Number
    
  • Your Name
    
  • The Date
    
  • Your Agent’s Name & Contact Information
    
• Preliminary Net Sheet
  This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any. Your closing agent or lawyer should be able to prepare this for you, if you do not know how to calculate any of these fees. If the bottom line shows cash to the seller, you will probably not need a short sale.
  
  
• Hardship Letter
  The sadder, the better. This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized or a truck ran over your entire family, but lenders are not particularly empathetic to situations involving dishonesty or criminal behavior.
  
• Proof of Income and Assets
  It is best to be truthful and honest about your financial situation and disclose assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.
  
• Copies of Bank Statements
  If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it’s probably a good idea to explain each of those line items to the lender. In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.
  
• Comparative Market Analysis
  Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a comparative market analysis (CMA). Your real estate agent can prepare a CMA for you, which will show prices of similar homes:
  
  • Active on the market
    
  • Pending sales
    
  • Solds from the past six months.
    
• Purchase Agreement &
  Listing Agreement
  When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to allow payment of certain items such as home protection plans or termite inspections.
  

Now, if everything goes well, the lender will approve your short sale. As part of the negotiation, you might ask that the lender not report adverse credit to the credit reporting agencies, but realize that the lender is under no obligation to accommodate this request.

Article written by: Elizabeth Weintraub,

What is a Short Sale in Real Estate?

A Short Sale in Real Estate occurs when a lender agrees to write off the portion of a mortgage that’s higher than the value of a home — provided there is a buyer willing to purchase the property. So how do you a short sale in Real Estate? To make things easier for realtors and consumers here is the information you will need to do a short sale. Investors can use this guide also there are just a few things that are done differently.

1. Get a list of people in foreclosure or work from your referral base to send letter to potential clients in foreclosure.
2. Talk with homeowners
3. Meet with homeowners in foreclosure
4. Tell them you are a realtor and that you will be contacting the bank to list your property at a discount + your fee.
5. Get paperwork from homeowner to show the bank that there is a hardship.

6. Paperwork includes:
a. Authorization to Release Loan Information

b. Cover letter

c. Listing contract agreement

d. 2 year tax returns

e. W-2

f. 2 Months Bank Statements

g. Hardship letter

h. Personal financial statement
7. Call bank or lender to get loss mitigation number or use the list in this book.
8. Contact loss mitigation and fax over authorization
9. Call 2 days later and make sure the authorization is in their system.
10. Once authorization is in system, send over short sale package to the loss mitigation fax. (Note the fax may be the same for the authorization and short sale package)
11. Wait 3 to 5 days call loss mitigation to make sure they got the paperwork.
12. Meet BPO appraiser at the property to get the price that you need to sell the house at.
13. Once assigned to negotiator, then work with them to get the price you need to sell the property and get the time you need to sell it.
14. Once you get the ok from the negotiator, sell the property.
15. Sometimes in the MLS you will see the agent put short sale contingent upon bank approval. This has to do with the offers, if it is too low the banks will not sell.

I have given you a step-by-step guide to doing a short sale. I have been doing deals for a long time, so everything I am telling you works. These are tested methods, not theory. You must consistently call the lender and keep marketing. Consistency will get you the great deals to be successful at this type of business. Good Luck!

Article written by Derek Carter

What is a Short Sale? In this uncertain real estate market more and more sellers are finding they need to sell their homes for less than they owe on their mortgages, known as a “short sale.” This can be a good deal for you as a buyer, as long as you’re aware of the extra time and work required to make it happen. How does a short sale process work? For a proven Short Sale Kit Click Here! and read below.

The Mortgage Lender’s “Short Sale” Factors

The seller’s mortgage lender will be considering many factors in deciding whether to approve a short sale, including:

• Whether the seller is deserving of a break, due to financial hardship caused by unforeseen circumstances such as layoffs, divorce or illness
  
• Whether it would be cheaper to simply repossess the house, make any necessary repairs and sell it through a real estate agent
  
• How many other properties the mortgage lender currently has in default
  
• Whether there are co-signors who can be held responsible for the balance owed on the mortgage
  

The Short Sale Process

Your chances of success with the seller’s mortgage lender improve if your communication with them is organized and complete. Your first contact with the seller’s mortgage lender’s “loss mitigation department” is crucial in making a good impression. You’ll want to send them what’s called a “Release” or “Authorization to Release Information” already signed by the seller, which allows the mortgage lender to talk with you about the seller’s mortgage.

In your first talk with the mortgage lender’s loss mitigator, you’ll want to find out:

• Whether they think a short sale might be a possibility
  
• What information they’ll need to complete the process
  

Loss mitigators sometimes receive bonuses based on how many defaulted loans they can clear up, so they’re more likely to pay attention to your sale if you can show them you’re taking care of as many details and objections as possible.

It will be necessary to be specific about the seller’s financial difficulties with what’s called a “hardship letter.” The mortgage lender may also require paystubs, copies of medical bills, checking account statements and other appropriate evidence from the seller. The seller’s mortgage lender will look at the seller’s credit reports to verify the seller’s financial predicament. This will all take extra time.

Broker’s Price Opinion

The mortgage lender will order what’s called a “broker’s price opinion,” which gives the mortgage lender some idea of what the property is actually worth in the current market. A broker’s price opinion will be based on:

• the value of comparable properties in the same neighborhood
  
• the general condition of the neighborhood
  
• the condition of the specific property in relation to neighboring houses
  

If the person who is inspecting the property needs to look at the interior of the house, you’ll want to be sure someone is there to let him or her in. You may also want to provide the inspector with copies of low comparable houses in the neighborhood, and high estimates on any needed repairs. The lower the broker’s price opinion, the more likely the mortgage lender will approve a short sale.

Settlement Statement Scrutiny

The seller’s mortgage lender will want to have an advance look at what’s called the “ Settlement Statement” or “Settlement/Disbursement Estimate.” The mortgage lender will be carefully reviewing:

• Commissions going to real estate brokers
  
• Where your financing is coming from (Cash? A loan?)
  
• Payments to cover outstanding liens and taxes
  
• Approximate date of the closing
  
• Any cash to the seller (a definite no-no)
  
• Any other expenses which may raise a red flag
  

While buying a home on a short sale can be frustrating and time consuming, your hard work can pay off in a home that’s worth considerably more than you paid for it.