Short Sales
Short Sales
Completing a real estate short sale is one of the most difficult transactions in all of real estate. It is important to know that the company and team you hire to complete this process for you have expertise in this area. Considered by many one of the best options available to avoid foreclosure, the short sale is an increasingly popular option. In this option, the lender accepts less than what you owe on the property, relieving the homeowner of debt. Lenders are often willing to accept a short sale because it greatly reduces the expense and time involved in foreclosure proceedings. In most cases, a short sale does less damage to your credit than a foreclosure. A qualified REALTOR® will be exceptionally helpful in completing the short sale process with you. At Nex-Gen Partners we found it beneficial to make sure our clients know what is going to happen throughout the process. Below are the most common questions that have been asked by our clients. If you are speaking with others and they can't answer the questions below, we recommend seeking another opinion. An REO (Real Estate Owned) listing is a home that has gone through the foreclosure process and the bank or lender owns the home. A Short Sale listing is a home where the owner still owns the home and the bank has agreed to take less that what is owed. A short sale in real estate is selling a property for less than is owned on the property. For example: Loan Amount: $300,000 In the above example, the property is upside down a minimum of $130,000. In order to get the bank to take an offer at $170,000, a team of experts who specialize in negotiations with banks and marketing short sale properties to the real estate community are needed. How long does it take to complete a short sale? Banks can take up to 90 days to give an official approval of an offer once it is received. This process can be improved by communication with the bank by your representation. Open and consistent communication is what improves the process. Ensuring that the required paperwork by the bank is correctly filled out increases acceptance by over 45%. Some banks will destroy an application that is even off by one item. Our team ensures that your paperwork is completely filled out the first time so you have the greatest chance at acceptance. How long do I have until I have to move out? The bank is required to let you know when they have filed the notice of default with the county recorders office for the county you are in. The majority of banks do this after you have become 90 days late on your mortgage or 3 consecutive mortgage payments. What are the consequences of doing a short sale? Completing a successful short sale will mean that you will not have a foreclosure reported on your credit. This will also mean that on lending applications where it asks if you have had a property foreclosed upon you will be able to answer, 'no'. This is one of the single best consequences of doing a short sale. By requesting a short sale with your lender or having a team such as Nex-Gen Partners do this work for you, the number of calls you receive will be reduced by over 50%. What happens if it doesn't work? If your property does not sell as a short sale, it may end up being foreclosed upon by the bank. It is of the utmost importance to get the bank an offer to review so that they can decide how they can best help you and to accept the offer you have received. It is for this reason that you need to have a real estate team who specializes in short sales present to the bank on your behalf.
What is a Short Sale?
Market Value of Real Estate: $170,000
What's in a 'Short Sale Package'?
Each bank has their own separate set of forms that they can ask to be filled out. In fact, if you have two loans, the amount of information can be different between both banks. The types of information that can be asked for as follows:
Signed and dated hardship letter
Copies of last 60 days pay stubs
Copies of P&L statements (if you are self-employed)
Completed financial worksheet
Copies of last two years tax returns
Copies of last 60 days bank statements
Copy of investment account statements
Copy of Listing Agreement
Estimated net sheet (Preliminary HUD-1)
Identification of liens on the property
Buyer proof of funds or pre approval letter
Authorization letter from seller to lender
Nex-Gen Partners will guide you through all of the requirements regardless of which bank and which form that is required.
How do I choose someone to represent me in this transaction?
Shouldn't I just call my local Realtor who markets in the area?
Unfortunately, many of the real estate professionals are not trained on how to handle a property where more is owned that the property is worth. They are not trained in negotiation and not trained on how to deal with the banks and their representatives.
Agents need to have specialized training in order to complete this process so as to prevent further action by the bank against you. In addition, agents need to have a deep understanding of the process and be able to explain the value to the bank of working with the home owner.
Are all short sales the same?
No. It would be great if they were, as it would make things easier for home owners. Any short sale specialist who have helped both buyers and sellers on short sales properties will tell you that not all short sales are created equal. Success on short sales depends on a variety of reasons:
Uncooperative banks
Inadequate disclosure by the seller
Poorly prepared buyer
Bank delays
Poor communication by listing agent with the bank
Buyers back out
Seller fails to cooperate.
Can't I just do all this myself?
You could, but would you go to court without a lawyer if the side that was facing you had 15 lawyers? The fact is that this is a complicated real estate transaction with a large lending organization. this process can take 100's of hours for a trained professional to complete. Most people do not have the time to specialize in completing this kind of transaction. Our team is here to take the worry out of the transaction for you.
Supporting Financial Information
These items are typically the same required by a borrower when applying for a loan. The lender will let you know how far back (2 months, 3 months, and 12 months) the seller needs to go in supplying this information.
Pay stubs: Pay stubs allow the lender to see if the monthly take-home pay would cover the loan payments plus all the other monthly expenses. If the owner is unemployed, there will be no pay stubs to include.
W-2's and / or tax returns: The lender is trying to get a complete picture of the owner's financial situation. Is the income going up? Is the income going down? Will the borrower be able to make payments if the lender agrees to a repayment program?
Bank statements: Again, the lender wants to be sure the borrower is truly unable to make the payments and these support that. The bank will order a credit report on the borrower but if they have one available attaching it is a benefit. Speak With Other Consultants Homeowners in distress need to engage the services of qualified finance, tax, and legal professionals. However, homeowners who are in mortgage default or facing foreclosure may argue that they cannot afford to pay them. Attorneys who work with distressed owners may take into consideration the owners' current financial realities and allow for ways to navigate the process. What is the Impact of a Short Sale on My Credit? Short sales are considered preferable to foreclosures because short sales (1) lessen the impact a foreclosure can have on the surrounding community and (2) won't damage the distressed homeowner's credit as much as a foreclosure. For example, if the borrower is still current with other payments, a short sale may lower the borrower's credit score by as little as 50 points. After a short sale, the lender can report the mortgage debt as either: 1) Paid in full - paid as agreed A foreclosure, however, can lower a credit score by 200 points or more. It will remain a public record and in your credit history for 7 years. Why shouldn't I just let the home go to foreclosure? Your credit! Foreclosure is one of the biggest damages to your credit that can be done. You will have to disclose the fact that you had a foreclosure every time you try and purchase a new property in the future no matter how long it has been since you had the foreclosure. You will still be 1099 for the difference in the foreclosure sales price and the amount owed. In some cases, this can increase 50% by the time the property goes to foreclosure.
2) Paid - settled
3) Paid - unrated
Why would a bank agree to do this? Don't they just want my home, anyway?
The bank doesn't want to own your home. The foreclosure process is a very expensive process for the bank to carry out. There are legal fees, property fees, court fees, and additional staff required by the bank to handle foreclosures for a bank. Their goal is to prevent properties from going into foreclosure.
