+What is a Short Sale?A short sale is where a property is being sold for less than the total amount that is owed to all lien holders on the property.
An example of a short sale:
First Mortgage Balance is: $300,000 and Second Mortgage Balance is: $50,000
Total Value of Property: $315,000
So in the above example the property is at least $35,000 short of what is needed and that does not take into account real estate commissions and other fees necessary to sell a property. This is what is considered a short sale where the home owner will go to the bank to ask for assistance.
You currently are delinquent or might have problems making future payments
+What is my first step to request a Short Sale?Complete your lenders Short Sale Package including the Authorization to Release Information Form. This form will allow your listing agent to discuss the Short Sale on your behalf.
+What is a Hardship Letter?A hardship letter is a statement of how you and your family got behind on your payments. Banks need to know what happened in order to help you out in the best possible manner. Events that should be included in a hardship letter are as follows:
Loss of Job
Loss of overtime or income from a job
Family issues – pending divorce, medical bills, other family issues
This is one of the main pieces of information that the bank uses in order to make its decisions. It is important that it is truthful and explains what happened to the fullest extent possible.
+Why do I need a Listing Agent?The fact is that this is a complicated and difficult real estate transaction with a large lending institution. This process can take hours for a trained professional to complete. Most people do not have the time to specialize in completing this kind of transaction. Your Listing Agent will guide you through the process and can deal directly with your lender on your behalf.
+What information will I need to provide?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 hardship letter
Copies of last several paychecks for all owners of the property
Copies of P&L statements if you are self employed
Complete financial form – Each bank has their own standard
Copy of Tax Returns
Copy of Bank Statements
Copy of Investment Account Statements
Copy of Listing Agreement
Estimated net sheet
Identification of liens on property
Lender disclosure forms i.e. arms-length transaction
+How do I determine what my home is worth?Your Listing Agent can provide you with an estimate of what your property is worth. You can also research free websites such as Zillow.com. Your lender will also order a valuation of your property.
+What do I do if I already have an offer for my property?At the seller and owner of the property, you must review, accept and sign a writer offer that is then submitted to your Lender for review and approval. Your Lender will not choose or decide on an offer for you, but they can provide guidance as to the amount of loss they would be willing to accept. Be sure you have completed the Short Sale package that is required by your lender. Submitting the Short Sale package with a qualified offer does not guarantee you will be approved for a Short Sale.
+I have had my home on the market for some time now and haven’t received any qualified offers. What should I do next?Your Listing Agent should be working within the guidelines set by your lender for marketing your property for a Short Sale. Your Listing Agent should create a price reduction schedule. If there has been little or no activity or offers within the first 30 days, consider a list price reduction of at least 5%. Depending on activity level, this type of reduction may be needed every 15 to 30 days.
+What should I do if I have already received an NOD or NOS?Please contact your mortgage company to discuss all loss mitigation options. Submitting your request for a Short Sale does not stop the foreclosure process. All normal servicing including collections and/or foreclosure (if applicable) will continue unless you are otherwise notified in writing by your lender.
+How will this affect my credit?Your lender will continue, without change, the standard reporting activity to the credit reporting agencies with respect to your loan, until completion of the Short Sale transaction and funds have been received and posted representing the agreed upon short payoff amount. Once the Short Sale is complete, the reporting to the major credit reporting agencies is 'PAID IN FULL FOR LESS THAT THE FULL BALANCE'.
