Short Sale Process - What to Expect | Short Sale Pricing | Warnings 

 

What is a “Short Sale”?
A “short sale” is a term that is commonly used when a property is sold for an amount which is insufficient to pay the existing liens, encumbrances and costs associated with the sale of the property. The seller is often said to be “upside down” in the property.

 

The Scenario:
The current market value for the property is $500,000.00. Closing costs are estimated to be $40,000.00 and the current balance on the loan secured by the property is $390,000.00. The sale proceeds will be insufficient to meet the seller’s obligations at closing by $130,000.00.

 

Watch out for people who want to charge you up front for Short Sale Services...they may never perform!   When you hire us to handle your short sale transaction, all fees and commissions will be paid out of the proceeds of the sale of property. No additional fees will be charged to seller by PMZ or it's agents. Any payment for services rendered by PMZ and it's agents in the sale of this property are a reduction of the proceeds of the sale and are paid through escrow at closing.

 

Can I simply deed my property to someone else and avoid the hassle?
Deeding your property to someone without paying off the loan is nearly always a bad idea. In the first place, the lender still considers you primarily responsible for payment on the loan. If loan payments do not get paid, or if the lender ultimately forecloses, this will show on your credit.  Secondly, when you deed your property to someone else, you give up control of the property. Along with the deed goes the ability to control the property.  Do not deed your property to someone without paying off the loan unless you have consulted with an attorney.
 

What are the possible solutions?

The seller can deposit the additional funds required into escrow at closing or the seller can contact the existing lender to determine if the lender is willing to reduce the amount required to release their lien from the property.  The second of these two solutions is what the Green Real Estate Team works to facilitate in the short sale process.

 

What sort of hardship would my lender consider legitimate?
To some extent, that will depend upon the mortgage company considering the Short Sale request. Generally, so long as the hardship is real and the mortgage company believes the loan is likely to become delinquent as a result, the Short Sale request will be processed by the Loss Mitigation Department. A big key to getting Loss Mitigation to accept a hardship is to submit a strong hardship letter. The hardship letter sets the tone for the entire file.  Below you will find a list of “hardships” that are common and frequently accepted by mortgage lenders.

What kind of communication to the lender is needed ?
The seller should contact the existing lender to determine the documentation required to start the “short sale” approval process and the amount of time necessary for the lender to provide a preliminary determination, once the seller has provided the required documents.
 

I have two loans, can I still do a Short Sale?
Yes. We can work with both lenders to put together a Short Sale transaction. Even if the value of your home is below the balance of the 1st mortgage, we can normally get the two lenders to cooperate.  In the end, neither lender wants to own another home through foreclosure.  Jeff Green and the Green Real Estate Team at PMZ Real Estate have successfully completed short sales on homes with up to three loans.

 

Tax ramifications of a short sale vary from a zero tax burden for some to a significant tax burden for others.  As real estate sales professionals we are not licensed consult you on these issues.  Please seek professional tax, legal and credit advice.  We recommend that you visit:  http://www.irs.gov/individuals/article/0,,id=179414,00.html which is the IRS site explaining the Mortgage Debt Relief Act of 2007 and how it exempts many people from Federal Income Tax on a short sale.

 

The Purchase Agreement:

The lender usually not provide final approval for the short sale until the seller has entered into a purchase agreement with a prospective buyer and seller’s acceptance of this  agreement should be contingent upon the successful negotiations with seller’s existing lender to reduce the amount required to release the lien of record.
 

The Escrow:
If the short sale is approved, the lender will provide the escrow holder, upon request, with a written statement reflecting the amounts required to release the lien of record and any final conditions which must be met before the lender will authorize the escrow to close.