Short Sale Info

For anyone who is not familiar with the term “ Short Sale”, I will start with the basics.. rules and facts.
A Short Sale occurs when a lender allows the homeowner to sell their house, and agrees to accept a lower amount than the actual debt owed by the homeowner. So if the payoff on your mortgage is $500,000 but the home can only be sold for $400,000 the lender agrees to take a $100,000 loss and forgives the debt in most cases.
Seems like a dream come true, right? Sometimes it‘s a dream and sometimes a nightmare. Don’t get me wrong, a Short Sale is a better alternative for most homeowners, it also looks better on a credit report than a Foreclosure. The process is very involved and many factors need to fall in place before a lender considers a Short Sale.

Let’s start with the main factor and that is your hardship, your lender would want proof of your financial hardship in the form of tax returns, bank statements, pay stubs etc. The bank wants to make sure that first, you’re upside down on your home and owe more than what it’s worth and second that your in a financial hardship and can not afford the mortgage anymore.
A hardship letter must be written by the homeowner to the lender’s attention explaining how he/she got into this financial bind, reduction in income, loss of job and so on. The idea is to be as poetic and creative as possible. Pretend that you’re writing a letter to your parents asking them for money, then hope that someone in the bank will actually read it. Every lender works different and your lender may ask you to sign a Promissory Note saying that sometime in the future they may ask you to pay back the shortage amount. You should also consult with a tax advisor regarding tax consequences.

Once all these documents are in order the lender would want to see offers that were submitted on your home, so the best idea is to put the home on the market as a short sale while you’re working on the above mentioned documents.
I don’t suggest for anyone to perform these tasks on their own, the homeowner may choose any Realtor to assist them in this process. Best advice I can give you is to hire a Realtor who has completed Short Sales in the past, some Realtors use an outside expert and offer them a percentage of the commission to deal with the bank and submit paperwork.
While we are on the subject of commission, know that the lender is the one who pays the Realtor’s commission and all closing costs associated with the sale. On some occasions the lender may ask the homeowner to contribute a certain amount in order to satisfy a requirement, sometimes these lender’s requirements can be negotiated by your Realtor and possibly even waived.
Expect to sign and date documents until your pen runs dry, but it’s all worth it in the end.
There you have it….Short Sale in a nut shell. Of course there is more to it but I’m afraid I may lose or confuse you if I continue, so lets just say that I am here to assist, guide and represent you on this journey called Short Sale.
 
Eli MalolRealtor

Rodeo Realty

Lic# 01269513

(818) 266-4345