Do I Need a Hardship to do a Short Sale?

By
Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

www.CentralFloridaShortSales.com

Well that's a good question. What do you think? Most folks would probably answer this question with a resounding YES! But...what if I told you the answer is "No....you don't necessarily need a hardship to qualify for a Short Sale. You may be able to do a Strategic Short Sale". Heck, big business and lenders do them all the time.

One reason lenders/investors may approve the Strategic Short Sale is that the hardship in no way changes the financial outcome of the Short Sale for the lender. The numbers are still the same. In fact, the numbers may even be better for the lender on a Strategic Short Sale because the Seller is in a financial position to contribute. So why wouldn't they approve it?

Now while you may not have to have a hardship to do a Short Sale you may very well be required to be delinquent on your payments. This is mostly due to government intrusion into the process. For example HAFA (Home Affordable Foreclosure Alternative) requires the mortgage to be: "delinquent or default is reasonably forseeable." 

Also, if you have an FHA loan: "At the time the PFS (pre-foreclosure sale) closes the loan must be in default (i.e. delinquent more than 30 days)." FHA DOES require a hardship

If you are way upside down on your mortgage  and see no light at the end of the tunnel then you have to ask yourself some hard questions. The reality is that most of us will have to move for some reason over the next 5-7 years. So ask yourself:

  • If I'm upside down on my mortgage today will I still be upside down in 5 years if I have to move then?
  • Would my family be better off if I took the financial hit today instead of waiting?
  • If I did a Strategic Short Sale today would I be able to rent a property for my family and save a substantial amount of money each month?
  • How will going through a Strategic Short Sale affect my credit and will my interest rates on my credit cards go up drastically?
  • How will a Strategic Short Sale affect my job (security clearance)?

Ask yourself hard questions. Seek legal advice from an experienced Attorney. Talk to your CPA. Have a family meeting.

Then if you decide that a Strategic Short Sale is the option for you, remember, there are no guarantees it will work. You may be asked to contribute to the "Short". What I tell potential Sellers when they ask the question is... "If you have no hardship and you have assets or sufficient income the bank may very well want some of it. You may have to bring a cash contribution to closing and they may also want you to sign a promissory note. But you may very well have your Strategic Short Sale approved."

These are difficult times and that require making difficult decisions. Let me know if I can help.

Are you facing foreclosure in Florida?

Do NOT be foreclosed on! Avoid foreclosure. Short Sales DO close.

Want to find out more? www.CentralFloridaShortSales.com

***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.

The BIO for Bryant Tutas

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***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.

The BIO for Bryant Tutas

 

 Tutas Towne Realty, Inc handles Florida real estate sales, Florida short sales, Florida strategic short sales, Florida pre-foreclosure sales, Florida foreclosures in Kissimmee Florida Short Sales, Davenport Florida Short Sales, Haines City Florida Short Sales, Poinciana Florida Short Sales, Solivita Florida Short Sales,  Orlando Florida Short Sales, Celebration Florida Short Sales, Windermere Florida Short Sales. Serving all of Polk, Osceola and Orange Counties Florida. Florida Short Sale Broker. Short Sale Florida.

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Re-Blogged 12 times:

Re-Blogged By Re-Blogged At
  1. Larry Brewer - Benchmark Realty llc 08/13/2010 11:32 AM
  2. Andi Grant 08/13/2010 05:28 PM
  3. Bob Hertzog 08/14/2010 04:35 AM
  4. Tony and Suzanne Marriott, Associate Brokers 08/14/2010 05:31 AM
  5. Christa Hobart 08/14/2010 05:35 AM
  6. Roy Kelley 08/14/2010 05:35 AM
  7. Gene Riemenschneider 08/14/2010 05:51 AM
  8. D B 08/14/2010 06:01 AM
  9. Terrie Leighton 08/14/2010 07:13 AM
  10. Dub Walters 08/16/2010 02:09 AM
  11. Mike Calhoun 08/16/2010 07:46 AM
  12. Maria Mastrolonardo 08/16/2010 09:04 AM
  13. Bob & Leilani Souza 08/16/2010 05:03 PM
Topic:
Home Selling
Location:
Florida Osceola County Celebration
Groups:
Realtors®
Real Estate Rookie
Tags:
fha
hafa
strategic short sale

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Rainmaker
571,818
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos

Hi Bryant,  I'm not all that sure that most of the lenders even know what the realities are for the distressed sellers !  Even if they do fully comprehend the facts it still depends on a lot of low level staffers making the right decision !

Aug 14, 2010 06:59 AM #29
Rainmaker
1,027,100
Susan Haughton
Long and Foster REALTORS (703) 470-4545 - Alexandria, VA
Susan & Mindy Team...Honesty. Integrity. Results.

I don't even see how it is possible to determine "hardship" because many times hardships are self-induced through poor decisions.  Others may have made all the "right" decisions only to find themselves in a situation which can be remedied through a "strategic" short sale. I don't distinguish between the two and it's not my place to judge the homeowner's actions;  it is what it is.  I have found that those sellers who have tried to do the right thing all along and for whom keeping the property will eventually cause quite a hardship are often not opposed to making a contribution because they feel they should.

Aug 14, 2010 07:31 AM #30
Rainer
105,870
Brian Bean
The Dream Big Team at Better Homes and Gardens Real Estate Champions - Riverside, CA
Homeowner Advocate, Dream Big Team, S.Calif

Bryant, great discussion, and so true. Everything is negotiable. If a lienholder chooses to accept a settlement on the payoff of a loan, that is that lender's perogative. Homeowners who don't necessarily fit into the scenarios that would be considered acceptable hardships can obtain short sale approvals. Like you, we tell our clients that they should expect to have to bring some cash to the closing.

The property owners don't come out unblemished -- credit reports are damaged and they probably are paying a settlement fee.

Not all agents are comfortable with the concept. And not all agents are skilled enough to get past a potential initial decline either.

Aug 14, 2010 07:40 AM #31
Rainmaker
212,645
Gabrielle Nemes
RE/MAX Realty South - Tumwater, WA
206.300.8421, S King & Pierce County RE Advocate

Bryant, while I certainly understand and respect a stragetic short sale, and it's certainly not my place to judge the motive or perhaps the needs of a seller, the fact is that a strategic short sale ... especially where one is financially capable and current ... can be very very difficult and far more likely not to be accepted by the bank. As usual, this is question, at least in my mind, for a competent short sale attorney who can give them advice. I hesitate to take on a strategic short sale because the seller just wants to sell -- short because the house is worth less -- and then not be successful at obtaining bank approval. That's incredibly frustrating for the seller, and expensive for us.

Aug 14, 2010 08:14 AM #32
Rainer
21,917
Jeff Rainwater
John L. Scott MPV - Maple Valley, WA

Well, it depends on how you define a short sale. If your defanitition is simply a sale that will not result in enough to pay off the loan balance, then no you don't. If your defanition of a short sale is one where the lender accepts the loss of the deficiency, then yes you will need a hardship.

Here's the logic behind that....If the sellers situation has not changed thus they are able to make their payments just fine, then it's not in the bank's best interest to take a loss when they have an owner who can make the payments. If they choose to sell, then most banks would let them, so long as they paid the deficieny off or at minimum signed an agreement to pay it off.

But here is the thing that I think comes up a lot. The sellers claim they can't afford their payments yet when you ask them about hardship, they say they have none....THIS IS BS!!! SOMETHING changed in their situation if they were able to make the payments before but now they can't. OK maybe they didn't loose a job but maybe they started incurring extra expenses? Kid went to college and now they have to pay for it? They had a baby? The home needed some unexpected repairs which took a lot of money? Guess what those are hardships too.

If their "hardship" is that they chose to go to disneyland instead of making their mortgage payment this month, well then I don't know what to tell you. I would just smack them up side the head and tell them they are idiots and what did they expect? They're going to have to own up to that dificiency.

Aug 14, 2010 08:57 AM #33
Rainer
99,425
Curt Hess
ExecuHome Realty - Annapolis, MD
Luxury Home Consultant, Team Leader & CEO

Opening question is related to: Do I need some integrity in my life? 

Answer: No, but it sure helps when life gets tough.

I understand completely why someone would want to walk when they are many years from breaking even on their house, but THEY need to understand that there is a price to be paid. Honest hardship, now that's a story we all want to give our best shot to help alleviate. For the other guys? Not so much.

Aug 14, 2010 09:12 AM #34
Ambassador
1,704,310
Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

I think this can be so confusing for homeowners.  Heck, it's confusing for me.  Thanks for shedding some light on this subject.

Aug 14, 2010 09:37 AM #35
Ambassador
2,010,522
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

These are important questions for a seller to consider before deciding whether or not they should pursue a short sale.

Aug 14, 2010 11:45 AM #36
Rainmaker
354,363
Melanie Ross
Coldwell Banker Solano Pacific - Benicia, CA
Benicia CA & Vallejo CA Real Estate, 707-319-2828

I really like this blog.  and you put a different light on strategic short sales.  I liked this and it equips me to ask some different questions to potential sellers who think it is not possible. Thanks!

Aug 14, 2010 12:02 PM #37
Ambassador
1,674,297
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

I'm going to do what is best for my client. I realize that if they have one million dollars in the bank, a short sale is not an option but then again, these are not the folks asking for help.

Aug 14, 2010 12:03 PM #38
Rainmaker
186,230
Cameron Wilson
Labrum Real Estate - Murrieta, CA
The Short Guy - Murrieta,Temecula,Menifee Californ

Even investors run into hard times and a Strategic short sale just makes good business sense as after all it is business.

Good info Broker B.

Aug 14, 2010 01:06 PM #39
Ambassador
891,130
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Interesting times...  MAybe a law practice will sprout up around this very issue...

Aug 14, 2010 02:10 PM #40
Rainer
105,870
Brian Bean
The Dream Big Team at Better Homes and Gardens Real Estate Champions - Riverside, CA
Homeowner Advocate, Dream Big Team, S.Calif

Jeff #33:

"Here's the logic behind that....If the sellers situation has not changed thus they are able to make their payments just fine, then it's not in the bank's best interest to take a loss when they have an owner who can make the payments. If they choose to sell, then most banks would let them, so long as they paid the deficieny off or at minimum signed an agreement to pay it off."

Short Sales are a matter of math. If a homeowner has stopped making their payment or plans to, the sale is happening, either through a short sale or a foreclosure. With that in mind, it's simply a calculation: What will net the bank more money? One penny better short sale vs. foreclosure, and it is in the bank's best interests to do the short sale. Cash at closing or a prom note may be required by the bank, and no one is saying the deal will be a slam-dunk, but the sooner we agents focus primarily on "The Numbers," the sooner our jobs will get easier.

Aug 14, 2010 07:11 PM #41
Ambassador
3,513,333
Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

Hi BB!  Excellent advice and points for those considering a short sale.  It's ALWAYS best to consult an attorney and CPA FIRST, for certain.  Those who are well-versed in these matters can shed a better light on the topic to help them make the right decision for their individual situation.

Aug 15, 2010 06:54 AM #42
Rainmaker
270,847
Phil Stevenson, CRMP
PS Mortgage Lending 305-791-4874 or 888-845-6630 - Miami, FL
"Mortgage Nerd" in Miami, Florida and Texas

the new short payoff refi program is also a viable option, one that requires you to not be in default.  So its good for those who can afford it, want to lower their payment, and lower their debt.

Aug 16, 2010 12:10 AM #43
Rainmaker
1,142,336
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Martin (Synergy)# 12. I agree it needs to be a pro but I disagree that that can't be the agent. Good agents negotiate fora living. A short sale is nothing more than organization and negotiations. If an agent is successful in real estate then they should already have these skill sets.

Kent # 11. I aaaagree completely. It's not our job to judge. It's our job to sell real estate.

Stacey#26. If you have just listed your first short sale you definately need to join our network at http://ShortSaleSuperStars.com  Don't go it alone!!!

Terrie #28. Thanks for the testimonial!!!

Folks you have to remember that in my area property values are down 75% and in some communities as much as 85%!!!! There are people that purchase with 30% down and they are still up side down by 280%. This means they bought a house for $250,000 put 30% down so now owe $175,000 on a house valued at (75% less) $62,500!!! Their payment could be as high as $1,800 on a property they could rent for $650.

So if this were you...would you continue to throw away $1,150 per month knowing that it will take DECADES before yio are back on top of your mortgage. And then mostly because you managed to pay it down.

I'm going to write a post later today to show you exactly what these figures look like.

 

 

Aug 16, 2010 12:44 AM #44
Rainer
23,908
Mike Calhoun
iMarketLuxury - Seminole, FL

Outstanding material like always, Bryant!! Had to re-blog this one, since it's so relevant to my clients...

Aug 16, 2010 07:47 AM #45
Rainmaker
1,142,336
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Here's the follow up tro this post.

WHY A STRATEGIC SHORT SALE MAY MAKE SENSE

Aug 16, 2010 11:10 AM #46
Rainer
28,555
Tricia Houston
Lending Maven Mortgage - Denver, Colorado - Highlands Ranch, CO

good information!

Aug 16, 2010 03:28 PM #47
Rainmaker
1,057,450
Bob & Leilani Souza
Souza Realty 916.408.5500 - Roseville, CA
Greater Sacramento Area Homes, Land & Investments

Thanks for this two-part series on short sales, BB...it's terrific re-blog material! :)

Leilani

Aug 16, 2010 05:18 PM #48
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