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Short Sales for Real Estate:
Real Estate Short Sales In Today's Housing Market
 By Patrick McGilvray, J.D., CFP®
How You Can Do a Short Sale with The Home Buying Center
Losing a home can be a very painful experience. If you are facing foreclosure or think you might in the future all hope is not lost!
If you would rather explore other options besides bankruptcy or foreclosure to avoid lawyer bills, embarassment, severe damage to your credit report, and a blow to your self esteem you should read this entire report and start taking action.
You Can Move On!
You may not be able to keep your home, but you can keep your dignity and move on with your life. If you own a house and can't keep up with your payments you still have options. One real estate solution is known as a "short sale". This is where your lender agrees to let you sell your house less than what you owe because they believe that you will eventually let the house go all the way to foreclosure and they will own it. This is also known as debt forgiveness.
Banks and other lenders would really rather not own your house in the vast majority of cases if you can't pay your mortage. There are some disadvantages to a short-sale, but if you do your homework by reading this guide and putting it into action, you have a chance to avoid going down with the ship.
Things to do to protect yourself:
- Get a competent real estate lawyer.
- Discuss with an CPA or tax expert possible tax implications. Debt forgiveness by your lender can be seen by the IRS as income, and some states allow, in some circumstances, a lender to try to recover legally from the borrower the amount forgiven in an action known as a deficiency judgment. Licensed attorneys should be consulted if your lender initiates legal action.
- Understand that this guide is not legal advice and is not a substitute for working with a trained professional in your area.
- Lenders are not all alike and some will require more documentation and be harder to work with than others. Persistence on your part is one of the key ingredients in a successful short-sale. If you have a first mortgage from one company and a second mortgage from a different company then you and your agent or broker will have a lot more work to do to satisfy them both.
- You will need to have your house sold to a buyer through a real estate agent who specializes in handling short sales. Some agents truly are better at handling short sales and can help you sell your house faster than an agent with less experience working with buyers who want to buy a house in foreclosure or pre-foreclosure. At The Home Buying Center we have built a network of hundreds of short sale specialists across the country and together they have helped tens of thousands of home sellers and home buyers.
9 Steps to Short Sale Success
1. Call Your Lender
They may be willing to help you, but it make take several calls to find the right person. Ask for the name of a person in the "loss mitigation" department or the "short sale" or "work out" departments. Try to get the name of a supervisor or manager who has the power to help you. You may also choose to have your short sale specialist agent or broker call on your behalf to explain the situation. But, to do this you must...
2. Give Lender your Letter(s) of Authorization
Your lender cannot legally share your private information with other people without your written consent. So, you need to make sure that you write your lender a letter giving permission to talk to such people as your short sale specialist agent or broker, the escrow officer, the closing agent the title company, and your lawyer.
Include:
* Your name and signature
* Property address (and Parcel Number (APN) if you have it)
* Loan Reference Nujmber
* Date
* Your short sale specialist's name and contact info.
3. Listing Agreement
Choose the short sale specialist agent or broker you think can best help you oget you what you want - a quick house sale. Sign a listing agreement with him or her and understand that they are going to have to work very hard for weeks and weeks sometimes negotiating with the lender to help you sell quickly. Your lender will want a copy of this agreement.
4. Work up a Preliminary Net Sheet
This estimates what selling price you expect and the costs of the sale, unpaid loan balance(s), late fees and penalties, commisions to your agent. Your short sale specialist, lawyer, or CPA should be able to create this for you. If you end up getting back a little money then you won't be actually doing a short sale. Some people who have some equity in their home will still price it well below the current market in order to sell the house quickly.
5. Hardship Letters
Your lender wants to know why you can't make your house payments. Briefly describe the reasons for your financial difficulties. Common reasons that lenders are more sympathetic to include: illness, job loss, relocation, death of a family member. The lender must really believet that they will not get paid back what you owe them before they will do a short sale. This letter can help them help you.
6. Prove your income and your assets
Honesty is the best policy when dealing with these matters, so make sure to report to the lender all of your current income and assets such as checking and savings accounts, money market accounts, investments such as stocks, bonds, other real estate, or other valuablbe property. The want to know you really have now way to pay them back.
7. Bank Statements
Your lender will probably want to check your statements to see how you deposit and spend money. They may look for large cash transactions and question you about othem. They may also inquire into your deposits to see if they will last in the future.
8. Comparable Market Analysis
If your house can't be sold for what you bought it for it is because the market has declined. This should be demonstrated by something your short sale specialist agent or broker can help you with known as a CMA or comparable market analysis. These are the "comps" agents and brokers talk about. This report usually includes:
* Other houses like yours on the market
* Recent Sales
* Pending Sales
9. Purchase Agreement - Contract of Sale
When you and a buyer have agreed on price to sell your house your lender will want a copy of the offer from the buyer before it is finalized and accepted. The lender may ask to change the commissions for the agnents involved, and may not allow you to pay for things such as home warranties or pest inspections.
* Final Tip to Protect Your Credit Rating: once you have successfully gotten the lender to agree to accept less from a new buyer for what you owed you can poliltely ask them if they will not report this to the credit bureaus. The don't have to help you, but it has been known to happen in the past for people who have developed a goog relationship with the loss mitigation specialist from the lender during the process.
*Disclaimer: This document in no way attempts to give legal or tax advice. You should consult a licensed attorney/lawyer, tax advisor, or other advisor if you have questions about your specific situation.
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