Back in 2008 I posted this and I thought I'd bring it back to life as it has some good basics for distressed Sellers when they want to Short Sell their homes.
So you've been hearing about Short Sales as a possible way to avoid foreclosure. But you're asking what is it and how do you qualify? Good questions.
First let's look at "What is a Short Sale?" You may have heard this before but lets not assume that everybody looking in here knows the answer. We'll get into more detail shortly.
- A Short Sale is when you receive approval from your Lender (Bank) that they will agree to allow you to sell your home for less than your mortgage balance to a Buyer who has submitted an offer to purchase your home. All in an attempt to avoid mortgage foreclosure.
- For example, You owe $300,000 on your home and you have a buyer who has offered to pay $225,000. Your Lender will agree to accept the $225,000 after review of the Short Sale Pkg even with the deficiency of $75,000.
- This approval is based on a number of factors that will be addressed in another Chapter.
- Your goal is to receive written Short Sale approval from your Lender and the next thing for you to do will be to pack up all your belongings and get ready to move upon the closing, as a new Chapter of recovery will begin to take shape in your life. It can be a good thing.
Now the question comes up; "How does somebody qualify to sell their home as a Short Sale?"
- In most cases it's best that some type of a Hardship has been determined in your life to lessen the chances of a contribution by you. So what qualifies as a Hardship? Lets discuss some possible hardships:
- You've lost your job and your household income has been drastically reduced.
- Your family has had medical expenses that have eaten into your ability to pay.
- You've gotten a divorce
- Your adjustable rate mortgage had been adjusted and there's no way you can make the new payment on your income.
- Your employer has cut back on your salary or perhaps on your hours of work.
- A loved one has died
- Your job required you to move out of town and you're now paying two house payments and you can't sell your home that you've been trying to sell.
- Basically, you are now living a financial nightmare where your expenses are more than your income; you're insolvent
- Other economic hardships may occur and may qualify you for a short sale when you're not insolvent. At this point, your Lender may request a Promissory Note for your short deficiency (to be discussed in a later chapter)
- You will need to be able to document your hardship as your lender will want proof.
- You will need to prepare a Letter of Hardship detailing your circumstances and what got you into your situation. This is a letter that you need to write and you don't want to leave anything out. Your Lender must be able to feel your distress.
Make absolutely certain that the hardship letter is dated AND signed by the borrowers listed on the loan.
in 2008 did you think you would still be concerned about short sales in 2012?
Bernadette, you're right as the hardship letter must be signed and dated.
Erv, I've always thought that Short Sales and their impact were going to be felt for quite some time and yes, I did think that we'd still be concerned with Short Sales in 2012. When I started in Short Sales not many Agents were listing Short Sales nor wanted to and many thought I was crazy for taking them on however it has been very rewarding for me in saving distressed sellers from foreclosure. Now that Short Sales are such a huge part of the market everybody is listing Short Sales and that isn't such a good thing as it's not about taking a listing and hoping it sells when you're dealing with a distressed seller as there is so much more on the line. It's a real shame to me when I see distressed Sellers being represented by Agents who lack the skill and knowledge in getting their Short Sale to closing. The distressed market is between 40%-50% here in my South Florida market of Coral Springs of which half of that are Short Sales. So my concern is the Seller and how they're being represented here in 2012 or should I say the lack of representation.
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