SHORT SALES... the bane of our existence. But like it or not, for the moment, they're here to stay, so better edumacate yourself.
They can be difficult, long, and still end up at the end of the day, not resulting in a transaction. Frustrating, I know. But the banks are becoming better and better and handling and understanding short sales. They recognize, within reason, that a short sale is a better result for them, than a foreclosure, and they're trying.
So where does the failing in most short sales lie? It often lies with the agents. The listing agent doesn't understand what's necessary, and how to communicate with the bank, and the buyer's agent doesn't understand what they need to submit with the offer to "lubricate" the offer.
So.. this week, Andrea Seeley, an agent in our downtown Evanston Coldwell Banker office, gave us a very thorough explanation of what a short sale is, and isn't... and outlined a lot of the paperwork that's required, and how to handle it... so I'm very grateful to her and her team... she's a short-sale expert... and if you're looking for short-sale agent, I recommend her highly.
So, let's touch base on what a short sale is:
(please note that I conduct business in the state of Illinois, so what I'm quoting may not be applicable for your individual state. Do the research, know what you're doing.... please.)
JUST BEING UNDERWATER doesn't automatically qualify you for a short sale. Just because you owe more money than you can sell the place for isn't going to cause the bank to roll over and say "okay, we'll take the hit". A short sale is NOT a "Get out of Jail, FREE" card.
Your bank is not going to approve a short sale, merely because you're underwater, you want a fresh start, or just because the property values in your neighbourhood have dropped significantly and you don't think it's "fair".
The bank is going to look for evidence of:
* Financial hardship * Medical illness * Relocation * Divorce * an increase in your mortgage payment (such as an ARM that has reset) * Serving in the Military * Being incarcerated * an inheritance that you cannot afford
They need to know that the transaction is at Arm's Length. What the heck does "Arm's Length" mean? It means that you CANNOT short-sell your home, and have your mother, brother, father, business partner purchase it. You and the buyer can not have any relationship, nor any side agreement that they'll let you rent the house. Nuh-uh, not gonna happen. If you violate those terms, that could become your "Go INTO Jail" card, 'cause it carries a 5-year Jail term, and $10,000 fine!
So, you've decided to list a short-sale. What forms do you need to have your seller sign? Start with your standard listing package.
* Add to that an authorization that says all lien holders are allowed to communicate with you. 3rd party authorization.
* You want to include any short-sale addendum that your agency requires.
* the Mars Disclosure... (What's that?) the Mortgage Assistance Relief Services disclosure. This is a disclosure that protects the seller and the agent. Don't forget it.
* the Dodd-Frank Certificate... (huh?).. certifies that the seller hasn't been convicted of felony, theft, money laundering, tax evasion and more.
* 4506-T... the form that authorizes the bank to actually view your tax return. It's so easy to fake a tax return these days.
* RASS form... (What'd you call me?) this is the Request Authorization for Short Sale. Each bank may have their own... but this puts the bank on notice that you're planning on short-selling one of their loans... and you get their authorization to do so.
So... have I scared you off, yet?
Let's say you've finally found a buyer and the seller has signed-off on the price (Remember... the SELLER approves the contract, but the LENDER approves the short-sale! Now... here comes the tricky part.
Submitting the offer to the bank so that it'll actually come to fruition.
There's a lot to submit, to make sure that the offer is actually taken seriously. And yes, some of this paperwork MIGHT be something you've already sent them... but it's fully possible that it's on someone else's desk... so send it ALL again... one package all in once place.
* A cover letter, spelling out who/what/where.
* the RASS form.
* 3rd party authorization form.
* A fully executed contract (make sure you haven't left anything out). Along with copies of the earnest money checks.
* If it's a condo... a copy of the 22.1 disclosure.
* The buyer's preapproval form. If you don't have this, don't bother with the submission... go back and get it!
* If they're paying cash, some sort of proof of funds.
* Dodd-Frank certificate
* 4506T form.
* 2 years tax returns of the seller.
* the Buyer's W-9... yes, really!
* a Preliminary HUD-1. If you don't know how to get one of these, ask your local title representative.
* the Listing Agreement... (with no more than 6% commission on it... if you've agreed to more than 6%... even if that's 6% + a service fee of some kind... you've opened yourself up for the lender to comeback and negotiation your commission).
* Marketing History Report (yes, they like these... they want to see that you really tried).
* MLS comparables.... be honest.... they're going to check.
* A Hardship letter... written by your seller... the more detail the better... the more heartache your hear in the letter the better... but outline the financial hardship! It must be written by the seller... preferably in their own handwriting.
* 6 months of the seller's paystubs
* 2 months of the seller's bank statements.
* A report on the property's condition, along with photos.
Whew! There we go... I'm sure I've left something out... but if you follow those instructions, you'll be on your way to a successful short sale. If all of this scares you... do everyone a favour and refer it out to someone who knows what they're doing. Andrea Seeley would be my first choice, and she can be reached at 847.864.2600, or on her cell at 773.593.6994. Andrea, thanks for the valuable information.
Don't let anyone tell you that we don't earn our commission these days... yeesh!