Why did I choose to specialize in short sales? I like sticking up for the person that can not stick up for themselves. The clients that have tried and tried everything to keep their house only to be denied and struck down by their lender like they are just another number. It is very satisfying for me to be able to come through for and be the voice for the average Joe or average Jane that they need and deserve.
Connecticut Short Sales can be difficult to complete and quite confusing for buyers and sellers.
To help you to better understand the Short Sale Process, I have compiled a list of commonly asked questions, along with information I need when handling a short sale in Connecticut.
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Do I have to include my spouse on all the paperwork if they are not on the loan?
Usually not, unless advised differently by your attorney. In Connecticut however, if your spouse is on legal title to the property, they will be included on the listing paperwork.
Can I sign the paperwork myself if there are others on title with me?
No. All persons who are on title must sign listing paperwork here in the State of Connecticut.
Why are you considering a short sale?
Performing a short sale should be the last action before letting a property fall into foreclosure. You should have already explored other workout options first. Loan mod, forbearance, refinancing. Once it is clear that other options will not work for you, it is time to look seriously at doing a short sale.
Do not delay; take action so that you will be left with enough time to complete a short sale prior to foreclosure.
How much time do I have to complete the short sale?
It depends on the individual banks involved. The foreclosure process usually starts when you fall 90 days behind, but will vary. Once you are served papers by a sheriff, the state of Connecticut has a mandatory foreclosure mediation program that also can delay the process.The more time I have as a Realtor to conduct a short sale, the better chance we have of closing the deal. Just make certain you have exhausted other options and are going to commit fully to the process.
Why do I need to try other alternatives to a short sale PRIOR to listing my home as a short sale?
A short sale is simply another workout option to a bank, just as a loan modification, forbearance or refinance. When you put your trust in me, and list your home with me, I immediately go to work investing time and money into your transaction. If we start a short sale and then you decide to try another workout option, the bank will suspend the short sale in favor of the other option. Leaving the listing agent (myself), attorneys, buyers with offers on the property, and anyone else involved in the transaction in a holding pattern.It can take a month or more to get an answer on additional workout options. By that time, all the data and offers on the short sale will be obsolete.The bank will request all new paperwork to re-initiate the short sale. Bottom line is you can only do one workout option at a time.
Will banks let anyone who is behind do a short sale?
No. A hardship is usually required. Examples of hardship : job loss, pay cuts and underemployment, mortgage payments that have escalated beyond what you can now pay, job transfer, an increase of the monthly obligations of the borrower such as having additional dependants to support.
If I file a bankruptcy, how would that affect the ability for me to sell my home on a short sale?
It's difficult to do both at the same time. The trustee has to approve the sale and in some cases it could take 3 or more months to get a court date and may jeopardize the short sale.
Should I continue to attempt to pay my mortgage while attempting a short sale?
As a REALTOR, I can not advise you to not to pay your mortgage. This is a decision that you need to make on your own. My job is to get the home under contract, negotiate with your lien holders to approve a short payoff, and get the home successfully closed.
Do I have to be behind on my payments to do a short sale?
It depends on the bank, but usually, yes. Some won't even look at a short sale application without being behind, others will begin the process if default is imminent.
Can I do my own short sale?
No, or at best very unlikely. Lenders prefer the property is listed with a Realtor and getting as much market exposure as possible. Also, you can never short sale your house to a family member.
Who else should I talk to about doing a short sale?
You should consult with a real estate attorney as well as a CPA. There could be tax ramifications and potential deficiencies that may result from a short sale. I can not give professional advice in those areas.
I think I need to do a short sale on the home in which I live. How long can I stay there?
You need to maintain the home as good a condition as is financially possible for you. The easiest way to do that is to occupy the home up until closing, just like most regular real estate transactions.
I have tenants, how does this affect them?
You should be honest with them and let them know. Just as if you were selling your home fair market, they you may need them to move out early to accommodate a buyer who wants to occupy right away. You need a buyer more than you need a tenant, be up front and work it out in advance!
I am going to vacate the property. Do I have to maintain the property?
Yes. Or your short sale may not be approved. If you need to vacate, if your lender finds that the property is vacant, they will change the locks, secure the property, and winterize it ( if it is that time of year ). It's always better to stay in the home if you can. If your loan is an FHA loan, this may cause issues with gaining an approval and waiver of the deficiency.
What are some of the things my REALTOR will need to know in order to help me with my short sale?
They will need to know if you are current on your other bills, and if there could be any other liens filed on the property during the short sale. Past due medical bills, ( judgements from credit cards or a repossessed car ), a contractor that did work on your home and did not get paid, could all be a potential source of derailing your short sale. Avoid unnecessary liens. Sewer, water, trash and HOA dues (home owner association) dues. Keep paying them if possible. In Connecticut, HOA's are in a first lien position which means they get paid even before the banks do!
The more liens that are filed against a property, the more difficult it is to successfully close a short sale. A lien holding bank allows only so much of the proceeds of the sale to pay off closing costs, liens etc. And they usually will not touch a judgement lien. If the costs are too high, the bank will tell the REALTOR to find more money.
I hear that 2nd mortgages can really disrupt a short sale.
In our current real estate market in Connecticut, where homeowners are under water most 2nd mortgage holders have little hope to recover much of the money they lent. We rarely see 2nd mortgage initiate foreclosure proceedings as they will probably receive no money from the foreclosure.
Negotiations are crucial with them in order to have them cooperate, even though they have little financial incentive.
How is the REALTOR paid and what are the costs to do a short sale?
REALTORS are paid from the proceeds of the sale by the seller's bank. All costs such as taxes, commissions, escrow fees etc. are taken off the top.
The sellers bank will cap the fees. If the sale price is insufficient to cover the fees and still net the bank what it feels the property is worth, it will not approve the sale. Sometimes banks want a seller to contribute money or some other form of consideration (usually in the form of a promissory note or a cash contribution)
What if the buyer wants me to contribute to their closing costs?
Your REALTOR will write in the contract that any seller concessions are subject to the approval of the lien holding bank.If they approve the closing costs, you're set. If the don't approve and more money is needed, you will either have to get the buyer lower their demand for costs or you might want to contribute out of pocket if you can afford it. Remember, that you will be walking away from a very large debt and if kicking in some money to make the deal happen, you may want to consider it.
What is a deficiency?
The deficiency amount is equal to the unpaid mortgage balance less the amount received at foreclosure or the date the short sale closes. The goal of the short sale negotiations, in addition to the approval, is to obtain a full release from the bank in that they will not pursue a deficiency. At team CG, we have been very successfully getting a full release of liability for our sellers.
Why not just let my home go into foreclosure if I am going to still have potential liabilities?
Several reasons: first, an approved short sale, properly negotiated and reviewed by an attorney, usually means that the debt is satisfied. Banks will generally report that the debt was paid short of what was owed, but it will show as paid. Second, it is preferable to avoid a foreclosure on your record. Fannie Mae has indicated that it will be possible to obtain a loan from them after two - three years while a foreclosure is five - seven years. Your goal is to satisfy your debt obligations even though you are facing a financial hardship. Doing nothing is usually more destructive.
Patrick
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