SHORT SALE OPTIONS
AND THOUGHTS FOR SELLERS
If you know of someone who might be facing a financial hardship regarding real estate I can offer 30 years of experience and the Power of the Number one Company in the country and in the area: Adams Cameron & Co Realtors.
But what is more important: I have been working with a number of resources to help property owners keep their homes by utilizing the different avenues that are available today.
QUESTIONS:
If I owe more than my home is worth and I can’t make the payment, do I have to somehow qualify for a short sale?
The simple answer is NO. If someone can’t make their payment and that they are otherwise insolvent they qualify for a short sale. Note: insolvent simple means their total debts are greater than their assets.
Do I have to pay income taxes? Will the loss the bank takes be treated as taxable gain?
It was true, now it is not. Consult with your tax attorney or CPA. Recently the tax law was modified and now most people who do a short sale will have no taxes due.
Do I have to miss a payment to do a Short Sale?
No. Late in 2007 most major lenders started accepting short sale offers from sellers who have never missed a payment.
WHAT THE SELLER
CAN EXPECT FROM THE LENDER
GET PROPERTY ON THE MARKET
Show the lender that you are working in ‘good faith.’ Have your property listed on the market with a local real estate professional. This shows that you are attempting to solve the payment problem and are failing.
CALL THE LENDER
You may need to make six-eight phone calls before you find a person responsible for handling short sales. You don’t 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. This is not easy. There is one negotiator with a phone and fax number. (In some cases the lender will not talk with you until you missed a number of payments (4-6).
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 or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk to with a specific party about your loan. The letter should include the following:
| Property Address | Your Name |
| Loan Reference Number | The Date |
| Your social security number (last four digits) | Agent’s and Attorneys contact info |
PRELIMINARY NET SHEET
This is an estimated closing statement that shows the sales price you expect to receive and all of your costs of sale, unpaid loan balances, outstanding payments due and late fees, and real estate brokerage. Your real estate professional or lawyer should be able to calculate this. 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 lose your job, or have medical issues, 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, other properties, money market accounts, stocks or bonds, negotiable instruments, cash or anything of tangible value. Lenders are not in the charity business and often require assurance that the debtor cannot pay.
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.
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. Your real estate professional can do this for you showing similar properties:
- Active on the market
- Pending sales
- Solds in the past six months
PURCHASE AGREEMENT AND LISTING AGREEMENT
When you reach an agreement to sell with a prospective buyer, the lender will want a copy of the contract (offer) along with a copy of your listing agreement. Be prepared for you lender to negotiate and refuse to pay certain items i.e.: doc stamps, closing costs, title insurance and home warranties.
TIME FRAME??
You will be looking at months, not weeks. Allow 6 weeks or more to find out if the lender will work with you on a short sale. They will hire an independent person to do a BPO (Broker Price OPINION). Then allow another 4 to 6 weeks for a response should you get an interested buyer to write a contract. Why does it take so long? The lender is working on hundreds if not thousands of properties like yours. They try to make decisions on properties they will never see in areas they know nothing about just based on information from appraisers and other real estate professionals. Should the first offer not go through, you can expect a much quicker response on the next offer. Why? The lender now has all their homework done. From the time of an accepted offer allow another two to six weeks to get to closing.
