Short Sales Explained with Tiffany Saunders
Completing a real estate short sale is one of the most difficult transactions in all of real estate. It is important to know that the company and team you hire to complete this process for you have expertise in this area.
We found it beneficial to make sure our clients know what is going to happen throughout the process. Below are the most common questions that have been asked by our clients. If you are speaking with others and they can't answer the questions below, we recommend seeking another opinion.
What is a Short Sale?
A short sale in real estate is selling a property for less than is owed on the property.
Loan Amount: $450,000
Market Value of Real Estate: $375,000
In the above example the property is at a minimum upside down $75,000. In order to get the bank to take an offer at $375,000 a team of experts who specialize in negotiations with banks and marketing short sale properties to the real estate community are needed. That is exactly the expertise of Tiffany Saunders =Certified Short Sale Specialist.
How long does it take?
o Banks can take up to 120 business days to give an official approval of an offer once it is received. This process can be improved by communication with the bank by your representation. Open and consistent communication is what improves the process.
o Ensuring that the required paperwork by the bank is correctly filled out increases acceptance by over 45%. Some banks will destroy any application that is even off by one item. Our team ensures that your paperwork is correctly filled out the first time so you have the greatest chance at acceptance.
How long do I have until I have to move out?
o The bank is required to let you know when they have filed the notice of default with the county recorders office for the county you are in. The majority of banks do this after you have become 90 days late on your mortgage or 3 consecutive mortgage payments. From this time the earliest a sale date can be set is 90 days from that date. After the bank approves the short sale, they typically require a 30 day escrow. Once escrow is open your will have 30days to move out. The banks want you to stay in the home and maintain it during this process.
What are the consequences of doing a short sale?
#1 Mortgage Forgiveness/cancelled debt
o Ask your CPA how HR 3648 "The Mortgage Foregiveness Debt Reilef Act" benefits primary residences and wheather special IRS section 108(a)(1)(b) " Insolvency Exemption" can be applied to you investment properties.
o You will also want to talk with your CPA about how purchase money loans (non-recourse loan) and non purchase money loans (recourse loan) enabling the lender to pursue a deficiency judgment. http://banking.about.com/od/loans/a/recourseloan.htm
o Completing a successful short sale will mean that you will not have a foreclosure reported on your credit. This will also mean that on all future loan applications where it asks if you have had a property foreclosed upon you will be able to answer no. Answering yes will affect your interest rates. This is one of the most important reasons to do a short sale. Foreclosure stays on your credit report for approximately 7 years.
What happens if it doesnt work?
o If your property does not sell as a short sale it may end up being foreclosed upon by the bank.
o It is of the utmost importance to get the bank an offer to review so that they can decide how they can best help you and to accept the offer you have received. It is for this reason that you need to have a real estate team who specializes in short sales present to the bank on your behalf.
What kind of information will the bank ask for?
o Each bank has their own separate set of forms that they can ask to be filled out. In fact if you have two loans the amount of information can be different between both banks.
The types of information that can be asked for as follows:
¥ Signed hardship letter
¥ Copies of last several paychecks for all owners of the property
¥ Copies of P&L statements if you are self employed
¥ Complete financial form Each bank has their own standard
¥ Copy of Tax Returns
¥ Copy of Bank Statements
¥ Copy of Investment Account Statements
¥ Copy of Listing Agreement
¥ Estimated net sheet
¥ Identification of liens on property
o Our team will guide you through all of the requirements regardless of which bank and which form that is required.
What is a hardship letter?
o A hardship letter is a statement of how you and your family got behind on your payments. Banks are people too and they need to know what happened in order to help you out in the best possible manner.
Events that should be included in a hardship letter are as follows:
¥ Loss of Job
¥ Loss of overtime or income from a job
¥ Family issues pending divorce, medical bills, other family issues
o This is one of the main pieces of information that the bank uses in order to make its decisions off of. It is important that it is truthful and explains what happened to the fullest extent possible.
What if I have declared bankruptcy?
o Bankruptcy can delay a sale of your home at a trust sale. Your bankruptcy attorney may have additional advice for you and the team of Tiffany and Company are proficient at communicating with your legal representation.
o If you have declared bankruptcy please let Tiffany know and give her your attorneys information so we may be in contact with them.
What about bankruptcy?
o Bankruptcy can delay the sale of your home. Please refer to your legal representation for detailed questions on bankruptcy.
What do I do with letters from the bank?
o Read, review, and get a copy of them to Jennifer & Gary Ricco. These letters contain different pieces of information and it is critical to review all of them as they may have legal consequences to them.
Banks can send you letters in regards to the following:
¥ Loan Modifications - They can modify your loan so that the payment is more affordable for you and your family.
¥ Loan forbearance This is a temporary adjustment by the bank of the requirement to pay your mortgage. They can do this for reasons such as health, job, or family issues. The amount that you do not pay is generally added to your loan balance or spread out over multiple payments.
What do I do about people offering to buy my house if I just sign the deed over to them?
o Unfortunately there are many individuals out there who do not care about helping home owners in a time of need. They in fact only care about being able to profit from your situation. Our recommendation is that you make sure to have a real estate professional look at anything prior to signing any offer from one of these individuals. If the person has a legitimate offer they will not care who reviews the offer. Do not sign over the deed and beware of Investor Option Contracts.
How do I choose someone to represent me on a short sale?
o The team that you select first of all needs to have the expertise and training necessary in order to complete a short sale transaction.
o The team should be experienced with loss mitigation negotiations.
o The representatives should be able to tell you up front if they can help you and what they are going to be doing for you.
Shouldn't I just call my local realtor who markets in the area?
o Unfortunately 99% of real estate professionals are not trained on how to handle a property where more is owed than the property is worth. They are not trained in negotiations and not trained on how to deal with the banks and the banks representatives.
o Agents need to have specialized training in order to complete this process so as to prevent further action by the bank against you. In addition agents need to have a deep understanding of the process and be able to explain the value to the bank of working with the home owner.
Are all short sales the same?
o No. It would be great if they were as it would make things easier for home owners. Any team who has helped both buyers and sellers of short sale properties will tell you that not all short sales are created equal.
Success on short sales depends on a variety of reasons:
¥ Uncooperative banks
¥Inadequate disclosure by the seller
¥ Poorly prepared buyer
¥ Banks delays
¥ Poor communication by listing agent with bank
¥ Buyers back out
¥ Seller fails to cooperate
Will I get a 1099 for the difference between the sale price and what I owe?
o Yes. Each bank is different and the vast majority of banks will send you a 1099 for the difference. The difference or shortage may be forgiven under the Mortgage Debt Relief Act. We recommend you contact your tax advisor for assistance.
Why shouldnt I just let the home go to foreclosure?
o Your credit! Foreclosure is one of the biggest damages to your credit that can be done. You will have to disclose the fact that you had a foreclosure every time you try and purchase a new property in the future no matter how long it has been since you had the foreclosure.
Why is having a team working for me important?
o Specialization. You dont go to a regular dentist for oral surgery, you go to a specialist. Teams have specialists in each area. Tiffany is a certified short sale (pre foreclosure) specialist, and trained to handle all aspects of short sales.
o Teams cost no more than a single agent and you get more people for the same price.
What do you cost?
o The bank decides. Since the bank is losing money on the transaction they will decide what our team gets paid. The most important thing in this process is you the homeowner and we hope to help you next time with a buy or purchase.
Is it better or worse if I have two loans?
o It depends. Having two different lenders is one of the hardest short sales that can be done. It depends on how each bank has viewed the transaction and how they have both been communicated with during the entire process.
Is communication important and do I still have to keep calling the bank?
o Yes and Not with us! The number one reason for foreclosure is a lack of communication. We stop this from happening because we do the communication for you. You have a job but this is our job! We get authorization to speak to the lender on your behalf. We take care of the communication and make sure you stay informed of what is happening.
How do I know what is going on?
o We will communicate with you at a minimum of once every week on Fridays via phone and twice a week during escrow. You also receive e-mail communication from our team.
Why should I use Tiffany and Co?
o We choose you; we choose to work with clients we believe we can help. Our experience and success in short sale negotiations allows us to identify the clients we can help. If we dont believe we can help you we will tell you right away.
What if I have a prepayment penalty?
o We will negotiate with your lender to resolve this for you so you can get back to your life.
Can the bank come after me or do they just get my property?
o We specialize in negotiating with the bank and making sure they understand that working with us and you is in everyones best interest. The bank can ask for more information or seek other means to get payment if you have lied on your mortgage application and may or may not do this depending on the situation. If you believe you may have lied on your mortgage application please tell us. Our goal is to make sure the bank works with us and you to resolve this stressful situation.
Why would a bank agree to do this dont they just want my home?
o The bank doesnt want to own your home. The foreclosure process is a very expensive process for the bank to carry out. There are legal fees, property fees, court fees, and additional staff required by the bank to handle foreclosures for a bank. Their goal is to prevent properties from going into foreclosure.
Can't I just do this all myself?
o You could, but would you go to court without a lawyer if the side that was facing you had 15 lawyers? The fact is that this is a complicated real estate transaction with a large lending institution. This process can take 100's of hours for a trained professional to complete. Most people do not have the time to specialize in completing this kind of transaction. Our team is here to take the worry out of the transaction for you.
Who is Tiffany Saunders of Tiffany and Co Remax?
o We represent distressed sellers, move up buyers, investors and network with real estate brokers who specialize in helping people get out of their properties that they can no longer afford or no longer wish to own. Regardless of your situation, the condition of your property, or how many you own we can help you. Everyone runs into difficulties now and then. Our goal is to make your stressful situation go away so you can get back to your life.
WE CAN Help!