Short Sale
Boise Real Estate and Meridian Real Estate
A short sale is where the lender agrees to accept less money than what is owed on the property. When approved by the lender, a seller will use a short sale to avoid foreclosure. The final decision on price and terms of the transaction, as well as the selection of the ultimate buyer, will be in the control of the lender, whose consent of the transaction is required in order for the seller to convey clear title to a buyer.
The lender will have to be convinced that the seller deserves to be approved for a short sale. The lender will require written documentation of the financial facts that led to the short sale request. The lender will need proof of income and assets, bank statements, and pay stubs. The homeowner will disclose all assets including investment accounts (401(k), IRA, etc.), stocks, certificates of deposit, and any ownership in other real property or businesses. Proof of hardship may include bills, unemployment records, death certificates, and divorce decrees. The homeowner will provide a preliminary net sheet which reflects the sales price expected and any other fees that will be endured on a sale, including real estate commissions. Include a CMA (Comparative Market Analysis) of current actives, pendings, and solds similar to your property.
Lenders will often cooperate with homeowners who face true hardships that make them unable to stay current on payments or sell the home for more than is owed. This can be a lengthy process so persistence and patience are critical to success. It can require many contacts, several callbacks, and even long periods on hold. Lenders have many homeowners trying to get approved for a short sale so they need time to process the paperwork and make a decision. Usually a realtor can be selected with a letter authorizing the realtor to negotiate on the homeowner’s behalf. It is important to ask for a representative from the loss mitigation department who is authorized to negotiate the approval of a short sale. All information submitted by the homeowner or the realtor must be accurate.
The homeowner or realtor may be able to negotiate with lender for a forbearance (to suspend, roll back, forgive, or add to mortgage or reduce payments). The lender may consider refinancing the loan with more favorable terms. Although lenders lose money when agreeing to a short sale, lenders are likely to approve the sale if foreclosure proceedings would be more expensive than the forgiven debt. In addition, if lender proceeds with the foreclosure, the lender will attain full ownership of the property. Most lenders do not want to own property since lenders show on their financial books the Real Estate Owned (REO) as liabilities. It stands to reason why lenders list properties as a liability since lenders are in the business of loaning, not owning. Mortgages, not real property, are the assets lenders want to hold.
Example of a seller to sell and buyer to purchase property. Seller and buyer acknowledge that a response from lender may take a significant period of time resulting in sometimes longer delays for all parties, and that the same is beyond the seller control. Furthermore, seller and buyer acknowledge that there is no guarantee that lender will provide a response. Both seller and buyer acknowledge that a contract to purchase property is contingent upon lender approval of the terms of the Purchase and Sale Agreement. The Purchase and Sale Agreement will need to include a short sale approval contingency that is contingent upon lender approval of the terms within. Either buyer or seller may cancel the Purchase and Sale Agreement by delivering notice in writing.
For further reading about forgiven debt, go to web address for the IRS:
(http://www.irs.gov/individuals/article/0,,id=179414,00.html )
Below is an example of a hardship letter for the lender to consider accepting a short sale process.
(Date)
(Lender Name)
(Lender Address)
(Lender's fax number)
RE: Hardship Letter - Short Sale for (address)
Dear Creditor:
Since last (month) I am experiencing financial difficulties due to (layoff, medical problem).
After having my current financial situation carefully analyzed, I have concluded that it is no longer possible to comply with the original terms of the agreement. I have no choice but ask you for your help on avoiding the foreclosure of my family’s home.
Due to the dropping of home prices that have affected the entire country in the last year, I currently owe more on my mortgage than my home is actually worth.
Please consider allowing me into your Short Sale Program so that we can lower the price and sell the house quickly before it goes into foreclosure. This will allow me to settle my financial obligation to you and have a chance to get back on my feet, without having to file for bankruptcy.
Please understand that financial hardships can occur and many times it is not a choice. I deeply appreciate your help in this matter. If you have any questions, or need anything further from me, you can contact me at (your phone # with area code.)
I am enclosing my (bank statements, late notices on your car, last year's tax returns, last 6 months of Profit and Loss statement (if self employed), last 2 pay stubs for all working borrowers (including L&I and unemployment benefit.) Authorization to disclose personal information and anything else you can find that will show full proof of the hardship)
I, (your name), state that the information provided above is true and correct to the best of my knowledge.
Sincerely,
(Home Owner Name)
(Address)
(Account number)
Here is a Need to Know list if a short sale process is approved by the lender.
1) Once you get the approval for a short sale, list your property with a Realtor. Seller still has to sign a listing agreement with a listing price.
2) Until the lender approves a Purchase and Sale Agreement, it is common that the lender will require the seller to keep the property on the market and deliver to lender additional offers to purchase the property.
3) Lender may demand more money than a buyer offers.
4) Buyer, borrower and lender must all approve of purchase and sale agreement, and all documents related to purchase agreement (addendums or counter offers) for short sale to proceed.
5) Once an offer is accepted by lender, seller and buyer can continue to closing.
6) There will be no money returned to seller at closing because more is owed on the property than it is worth.
7) Depending on the agreement, the seller may or may not owe the lender money. Check your State you live in also.
8) At closing, the lender will provide a check to cover the deficiency. But, depending on your hardship letter, you may still owe that money to the bank.
Hire us (Keller Williams Realty Boise i.e. Randy Gridley Team ) and with your written permission we will submit all this information for you.
