Short Sales

What is a Short Sale?

condo_ocean A short sale can be an excellent solution for homeowners who need to sell, and who owe more on their homes than they are worth. In the past, it was rare for a bank or lender to accept a short sale. Today, however, due to overwhelming market changes, banks and lenders have become much more negotiable when it comes to these transactions. Recent changes in corporate policy and the Obama administration have also improved the chances of getting a short sale approved. But to be technical, here’s a more official definition:
A homeowner is ‘short’ when the amount owed on his/her property is higher than current market value. Short sales occur when a lender accepts an amount less than the amount mortgaged as the total payment to settle the real estate debt obligation. Essentially the lender allows the homeowner to sell his or her property for less than what is owed on the mortgage.
A short sale occurs when a negotiation is entered into with the homeowner’s mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then ‘sold short’ of the total value of the mortgage. For homeowners to qualify for a short sale, they must fall into all of the following circumstances:
Financial Hardship – There is a situation causing you to have trouble affording your mortgage. Monthly Income Shortfall – In other words: “You have more month than money.” A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage. Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.
This seems simple enough, but it is a complicated process that takes the expertise of experienced professionals. Together, you can identify all possible options and, when possible, a CDPE can assist you in the quick execution of a short sale transaction. The average foreclosure can cost a lender from 35-50% of the value of a property.

Everyone Wins

It isn’t often in real estate transactions that virtually all parties with a financial interest can be winners in the same transaction. A successful Short Sale is one of those rare situations where everyone wins. The Buyer wins by acquiring a property at below market price. While some Short Sales will be bigger bargains than others, nearly all Short Sales will represent a good deal for the buyer. The Seller wins by avoiding foreclosure and all the credit damage that goes along with it. The property gets sold, all the loans get paid off and the existing lender pays all the sales costs. In most cases the Seller has no out-of-pocket expenses. The Mortgage Holder wins by reducing the loss they absorb to get the delinquent loan off their books. Mortgage companies know that the costs associated with acquiring a property through foreclosure hit their bottom line – hard. To resell the property the mortgage company frequently needs to invest money in clean up and repairs, and they need to pay staff to manage and maintain the property as well. This is precisely why they have set up Loss Mitigation Departments to resolve delinquent mortgages before the foreclosure is complete.

Approved Short Sale versus Unapproved

A short sale that has been approved by the bank is one which the bank has already negotiated a price and has processed the seller documents and has approved the seller for a Short Sale. An unapproved short sale is one which the seller is still waiting to hear from the bank if and when he/she is approved for a short sale and they are not Buyers interested in short sales should be ready to provide the banks (each bank requires different documents) the following:
  • Buyer’s Pre Approval Letter
  • Buyer’s social security Number
  • Date of Birth
  • Current address
  • Buyer’s full name
  • Pay stubs last 60 days
  • Complete Bank Statements all pages
  • Tax returns

Articles

http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=244043