Short Sale

Short Sale Process

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In this challenging economy, many homeowners are finding it more and more difficult to pay their mortgage on time or in full. Every day we hear stories of homeowners all over the country walking away from their mortgages (which could damage your credit rating for 8-12 years). Other homeowners feel they have no other choice but to sit back and wait for the lender to foreclose. If you find yourself in this situation, remember: you still have options!You may be able to avoid foreclosure through some of the new federal programs like HAMP or HAFA, or you could try to sell your home as a Short Sale. A Short Sale is when your lender agrees to accept less money to pay-off the mortgage than what the current pay-off amount is.

Having Difficulty making the mortgage payment? We are Certified Distressed Property Experts (CDPE) and Short Sale & Foreclosure Agents (SFR) to assist you with the latest bank out reach programs (Chase Bank, Bank of America, Wells Fargo, Citi Mortgage and many others). Utilizing the HAFA and other lender in house short sale programs for the Ladera Ranch Real Estate, Aliso Viejo, Rancho Santa Margarita, Mission Viejo, San Juan Capistrano, Coto De Caza, Dove Canyon, Las Flores, Laguna Niguel, San Clemente & Dana Point areas.

We’ve put together this guide of important information to help you learn about the process of selling your home as a Short Sale.

Qualifying for Short Sale

If the value of your home has declined below the total amount you owe on your mortgage then you are considered to be “underwater.” Homeowners who are underwater may want to consider applying for Short Sale approval from their lender.

 FIVE steps to apply for a Short Sale approval:

Step 1: Contact the lender’s Loss Mitigation Department

Contact your lender’s Loss Mitigation Department to determine your lender’s particular Short Sale process and procedure. In general, the lender will start the process by requiring that you complete a Short Sale “package.” You must find out your lender’s process for Short Sales. Some lenders won’t even consider your application for Short Sale unless you have an actual buyer in hand. In those instances, the entire Short Sale review process doesn’t even begin until after the property has been listed for sale and an offer has been received; this process typically takes longer. If you have already received a Notice of Default you should consult with an attorney prior to proceeding with a Short Sale.

Step 2: Completing the Short Sale Package

Remember that you are asking the lender to take a loss on this sale. Your Short Sale package is the only chance you have to explain in detail why this is necessary. If you do not provide complete, accurate information you could be denied.

You should also keep in mind that if you have other assets (recreational vehicles, 401k, investments, etc.) that can be tapped to pay your mortgage or to pay the loan in full your Short Sale application may be denied or the lender may require that you exhaust those assets prior to applying for a Short Sale. The lender will expect you to consider every income source available before agreeing to a Short Sale.

A Short Sale Package will likely require the following information from you:

  • Your financial statement information about your financial background, assets, debts, etc.
  • Mortgage statements from all lien holders
  • At least 2 or 3 months of pay stubs
  • Tax returns from the previous 2 years, including W2s
  • All bank statements from at least the past 2 months
  • Property tax bills
  • A hardship letter

Step 3: Formulating the Hardship Letter

Generally speaking, the letter should be succinct and straightforward. It should identify the property address and loan number, and speak directly to the reasons why you can no longer make the mortgage payments.

  • Financial hardship: Financial hardships are factors that negatively impact your income or exacerbate the problems associated with a reduction or loss of income.

For example:

  • Job loss
  • Change of life circumstance (death, divorce)
  • Illness and/or medical emergency
  • Interest rate change that causes the mortgage payment to increase
  •  Release of full debt obligation: Another important purpose of the Hardship Letter is to request full resolution of the debt. After stating your reasons for hardship, you should specifically request the lender approve your Short Sale request, accept less than what is currently owed on the mortgage, and extinguish the mortgage note.
    You should also ask the lender to accept the proceeds from the sale as payment in full of the loan obligation, and to forego any rights to a deficiency judgment to collect any unpaid mortgage debt amount (see “Deficiency Judgments” below). Many lenders may not agree to release its rights to seek a deficiency judgment so you should discuss your options with a tax advisor or attorney prior to proceeding with the Short Sale.

Step 4: Obtain Lender Approval to Sell

Once your hardship is determined to be genuine, the lender’s loss mitigation department will:

  1. Assess the value of the home to determine what the likely proceeds will be from the sale.
  2. Determine the minimum it is willing to accept from the sale, though this won’t necessarily be the list price. It’s also likely that it won’t tell you what its “minimum” is.

With the approval process underway, it’s time for you to connect with The Blackstone Team who are Short Sale Certified Agents. They’ll work with you to help determine the home’s potential sales price and anticipated list price for market. From this, they will be able to present further information to the lender as to what the expected lender proceeds will be after costs, commissions, etc.

Step 5: Selling the Home

Once the lender approves the Short Sale, you and your agent should immediately begin the process of selling your home.

As the offers come in, The Blackstone Team will work with you to decide which offers are acceptable, generally based upon price and terms of the contract.

Keep in mind that the lender has the final say as to whether an offer is accepted, so you can (and probably should) accept more than one offer, and submit more than one to the lender.

Submitting the Offer for Acceptance

The Blackstone Team will present the offer(s) that is best and will be accepted by your lender, along with:

  • Offer contract paperwork
  • Net Sheet: a calculation of all the costs, expenses, concessions, repair requests, etc., demonstrating to the lender what the lender will receive as an actual payout when the property is sold and settled
  • Any other documents required by your lender

This process could take weeks or months, so be patient.

Short Sale Q&A 

 

 

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