Short sales are a hot topic in the Hawaii Real Estate Market right now.  If you are a buyer you are wondering how a Short Sale will affect you.  If you are a Seller you are wondering if a Short Sale will help you.  If you are a Realtor you are concerned about Hawaii's Act 137, or you should be.   It is not a coincidence that short sales in Hawaii are on the decline and Lender Sales or the sales of Bank Owned Properties have increased in numbers through fall and winter.  This is due to Act 137.  Here's one of the act's new rules "The seller of a distressed property has the right to change his mind up to two weeks after the property has closed escrow when a distressed property consultant has been used in the transaction."...go figure...

The fact is that we can help you with a short sale, both on the buyer's side and on the seller's side.  There are simply very specific rules we must follow to protect all parties involved.  

The most often asked question is what is a short sale?  Basically, it is when the amount owed on the home is more than what the home can currently sell for. 

If you are looking at property as a buyer and you notice that it is a short sale, what this means is the home is listed at less than what is owed to the lender or lenders.  The process of a short sale can be difficult and frustrating; however, if a buyer is patient he or she might be able to obtain a property for a great price.  We have to stop here for a moment.  There is a huge difference between a short sale and a short sale of a distressed property.  If a homeowner is able to pay the lender the difference between the sales price and what is owed, chances are that it is not a distressed property.  The lender would not be involved any more than a normal sale.  If the lender is asked to forgive the difference of what is owed and the sales price or put off a foreclosure or in many cases both, then it would be considered a distressed property and the lender or lenders will be very involved in the sales process. 

Some banks will give approval for the seller to move forward with a short sale prior to receiving an offer.  Other banks will not even consider a short sale until offers are received.  Obtaining approval from a bank can sometimes take months depending on the lender.  This is where patience comes into play.  However, once approval is received the bank can sometimes be impatient to get the property to close.  With that in mind, when dealing with a short sale once you receive approval move quickly to ensure you close by the deadline issued by the lender. 

If you are a homeowner and need to sell your home now and can't wait for the market to change so you will be able to cover what is owed, you will fall within the short sale category.  Unless, you are fortunate enough to be able to pay the difference that is owed after the sale, you will have to deal with your lender.  Some homeowners prefer to pay the difference because they do not want their credit ratings to be affected.  For those unable to pay the difference there are steps you should take immediately. 

•1.       Call your lender and let them know that you will need to request a loan modification or short sale approval.  Your Lender will ask for specific documentation and you will need to get these to them in order for them to review your request and grant it. 

•2.       If you had 100% financing you probably have a 2^nd mortgage, or if you have a Home Equity Line, you will need to contact the lender and ask what their procedures are for a short sale and what documents they need in order to consider granting your request.  Please be aware that having a second mortgage will most likely cause delays in moving forward with a short sale.  If you are lucky enough to have both loans with the same company you will be much luckier in moving forward. 

•3.       Contact a Realtor who is familiar with Short Sales and Act 137.  They will be best able to help you with the process.  Act 137 is an act that binds our hands as your Realtor and really doesn't help you as the homeowner.  Although written by our Hawaii legislature and signed into law last June by Governor Lingle in order to protect the consumer, i.e. the homeowner in financial distress, in the long run it doesn't.  Realtors are advised by legal counsel not to contact lenders of their clients for anything.  Clients need to do it themselves or hire an attorney or hire a "Distressed Property Consultant".  We understand that this is nuts and we want to help; however, our hands are tied.  Sometimes we have been able to obtain assistance from a Buyer's Lender once in contract to assist us since Attorneys and Mortgage Officers are exempt from the law. 

Once you have a hired a Realtor, submitted the documents requested by your lender and received approval to move forward with the short sale, your Realtor will aggressively try to sell your property for you.  When a contract is accepted by your mortgage company the transaction will move forward like any other, with exception to documents at closing being forwarded to your mortgage company along with all proceeds.  Occasionally at closing you will be required to pay a sum.  This varies depending on your situation.

When you are going to pick a Realtor to help you, we hope you will pick us, Mike Ramsey Fujita RA, Vice President of Realty Executives Oahu and Gayle Fujita Ramsey RA Director of Training, Realty Executives Oahu (808) 630-1828 Mike@GreatHawaiianHomes.com http://www.GreatHawaiianHomes.com