Short Sale Agreements
What is a short sale?
Resources & Information about Short Sales for homes
Short Sales
As a result of the immense number of bad loans originated in the past five years, and the recent decline in property values nationwide, many Homeowners now find themselves in "upside down" loans. What this means is that the property is worth less than the amount owed. It is nearly impossible to sell your home using traditional methods when you’re in this situation. You may end up having to pay someone to take your home from you. However, there is an alternative method for selling an “upside down” property, and that method is a Short Sale.
A short sale is the sale of a property at fair market value, when the investor and or insurer agrees to accept the proceeds of the sale in satisfaction of the defaulted mortgage even though it is less than the amount owed.
Generally a short sale should be considered with homeowners whose financial hardships require that they sell their home, but who face problems selling because the value of the property has declined to less than the amount owed on their mortgage. A short sale may be considered at any time prior to foreclosure if the alternative means a lender will incur greater losses through foreclosure and be forced to acquire the property. In order to consider a short sale, a homeowner or real estate professional must submit a signed purchase contract and a HUD 1 settlement statement. Once the purchase and sales agreement is submitted and the other documents needed (financial statement, proof of income (paycheck stubs, bank statements and tax returns), authorization to release and hardship letter) are also submitted the qualification process begins.
Pre-Qualification Process
The pre-qualification program is the time frame usually 90 days but can be extended to 120 days to list the property at fair market value to obtain a purchase and sale agreement. If a contract is received the loan should be submitted for a short sale. The process for the lender is to:
Analyze the loan package documents to review the financial information to validate the reason for hardship
Review the appraisal to verify the property meets the investor/insurer guidelines
Notify borrower/realtor of approval letter that provides minimum property should be listed
Once a signed purchase and sales agreement is received the negotiations begin.
If there is no signed purchase and sales agreement after 90 days, should continue to market property but also consider a Deed-in-Lieu of foreclosure.
Short Sale Negotiations
The short sale negotiations begin once an offer is received. A signed contract is received by a potential buyer offering a price and sometimes with contingencies.
The contract is placed into a file with the other supporting documents required:
Hardship Letter - defining the reason for default and the supporting documents
2 Paycheck stubs or P&L (Profit and Loss statement if self employed)
2 Bank Statements - most current
Purchase & Sales Agreement (the offer)
HUD1 (Settlement Statement)
LOA (Letter of Authorization) be sure to have a date, seller signature, loan number, borrower name, SSN, property address, and Authorized Party(ies)
The Loan Documents are analyzed to:
Validate hardship
determine property value
determine if seller can contribute to sale
determine whether the offer is reasonable based on comparable sales and value (if you really low ball you will get a denial letter without consideration)
If everything checks out a call is placed to the Buyer or Buyer Representative
Negotiations begin:
determine if there is a ready and willing buyer
determine the investor and their guidelines based on the Pooling and Servicing Agreement
Once determined investor responsibilities and buyer ready to continue if the loan is in foreclosure the foreclosure is placed on hold.
What is a Short Sale?
Expert Help for Getting your Short Sale Approved
What is a Short Sale? Selling Your Home for Less Than You Owe
If you've taken out a large mortgage, and perhaps refinanced to cover remodeling or other expenses, you may find yourself unable to keep up with your mortgage payment after a layoff, divorce or illness.
If you've taken out a large mortgage, and perhaps refinanced to cover remodeling or other expenses, you may find yourself unable to keep up with your mortgage payment after a layoff, divorce or illness. United Real Estate Loan Services can assist you in negotiating a short sale with your lender if you need to sell your home for less than you owe on the mortgage. Selling short is definitely better than foreclosure, which stays on your credit record for ten years. But it's best to try to work things out with your lender before going through the embarrassing and laborious process of selling your home on a short sale.
Tax Issues
Before you put your home on the market for a short sale, it's best to talk with a tax advisor about possible tax repercussions. It's likely the IRS will consider the difference between the value at which you sell your home and the mortgage balance as "income" on which you'll have to pay taxes. An exception to this rule is if you can prove that you were "insolvent" - that your debts were bigger than your assets before your mortgage lender agreed to a short sale of your property. A tax advisor will be able to tell you for sure whether you'd be considered insolvent by IRS standards. If you can't prove you're insolvent, and the tax bill on a short sale would be more than you can pay, you may have to let the mortgage lender, foreclose or declare bankruptcy.
Be Upfront With The Real Estate Agent
You will want to find a real estate agent that sympathizes with your situation. If you find selling your house for less than you owe on the mortgage an option short of foreclosure or bankruptcy. Agents typically take a much lower commission on short sales, and it often takes much longer to actually close the sale once the seller accepts an offer. But many agents sympathize with financial problems brought on by unexpected circumstances, and may want to help.
Convincing Your Mortgage Lender
Real Estate Loan Negotiation Services will help in negotiating a short sale approval with your mortgage lender. The bank will have to be convinced that you deserve to be approved for a short sale. Now is not the time to purchase luxury items, like fancy cars or jewelry. Your lender will think you waste your money and don’t deserve a break after seeing these debts on your credit report. You may need to provide the lender, either through the buyer or buyer's agent or directly, documentation of your financial hardship, such as paystubs, bank statements, etc. This may seem like an invasion of your privacy, but may be the fastest way out of an overwhelming debt. Let United Real Estate Loan Services help you plan accordingly, short sales take much longer to close than conventional sales. You can avoid a mark on your credit report and bankruptcy, if it works. If it doesn't work, at least you've done everything you could do to avoid bankruptcy and foreclosure.
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Consumer notice: The information and resources presented on this Web site are not to be taken as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure that this information is up-to-date as of the date of publication. It is not intended to be a full and exhaustive explanation of the law in any area. This information is not intended as legal advice and may not be used as legal advice. It should not be used to replace the advice of your own legal counsel.
