Real Estate Broker/Owner with Rulnick Realty, Inc.


Do you own a HUD-FHA financed home, and need to do a Short Sale? Here is a summary of the requirements do perform an FHA-insured HUD Short Sale or "Pre-Foreclosure" Sale:

  1. You must be delinquent 31 days or more delinquent at the time of sale.
  2. You must list the property with an un-related Licensed Real Estate Broker
  3. You must actively market the property for four months (up to six).

    For the first 30 days of marketing, the short sale lender (mortgagee) may only approve offers that will result in a minimum net sale proceeds of 88% of the "as-is" appraised Fair Market Value (FMV). During the next 30 days of marketing, the lender may only approve offers that will result in minimum net sale proceeds of 86% of the "as-is" appraised FMV. For the rest of the marketing time (60 days), the lender may only approve offers that will result in minimum net sale proceeds of 84% of the "as-is" appraised FMV.

  4. The property must be an owner-occupied, except for cases of job transfer, death, divorce, job loss
  5. There should be written proof of your decrease in income showing inability to pay the mortgage, job loss, etc.
  6. HUD will pay up to 1% of buyer's mortgage as part of closing costs if the new mortgage is also FHA, plus reasonable "seller" costs
  7. HUD allows 6% Realtor commission
  8. HUD will not pay for Home Warranties, points or lender's title insurance
  9. You must get approval to participate in the HUD Pre-Foreclosure Sale Program in advance
  10. Upon acceptance into the program, you will be given Approval To Participate Form which will outline program restrictions

Here are details of the HUD Short Sale (Pre-Foreclosure) Sale Program.  Remember, these guidelines apply to FHA-insured loans only, and there may be some latitude in those requirements.  These guidelines are subject to change.

HUD Frequently Asked Short Sale Questions

For more information contact the HUD National Servicing Center, your lender, and an experienced Short Sale Specialist.

It's Wendy!It's Wendy!

Wendy Rulnick, Broker, CRP, CRS, GRI, ABR     Rulnick Realty, Inc.

Search Destin Florida real estate and vicinity.

Short Sale Pre Foreclosure Help.

Read my Blog.

Specializing in real estate sales on Emerald Coast of Florida: Destin Florida real estate, Santa Rosa Beach, Fort Walton Beach, Niceville, Bluewater Bay, Navarre, Seagrove Beach, Watercolor, Sandestin, Seaside, Dune Allen, Blue Mountain Beach, Freeport, Rosemary Beach, Mary Esther, Shalimar, Eglin AFB, Hurlburt Field.  Call toll-free  1-877-ITS-WNDY (1-877-487-9639) or local 850-650-7883 ext 204

Copyright © 2008 By Wendy Rulnick. All Rights Reserved. *HUD SHORT SALE GUIDELINES* Contact Wendy Rulnick regarding Destin Florida real estate and vicinity.

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Wendy Rulnick, Broker/Owner Rulnick Realty, Inc.

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Wendy Rulnick is the marketing choice for sellers on the Emerald Coast who want to list and get their homes and condos sold in Destin, Sandestin, Bluewater Bay, Santa Rosa Beach, 30-A, Watercolor, Seaside, Rosemary Beach, Seacrest Beach, Kelly Plantation, Regatta Bay, Destiny and more.

Rulnick Realty



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Wendy Rulnick
Rulnick Realty, Inc. - Destin, FL
"It's Wendy... It's Sold!"
Susan, I will email you privately.
Feb 19, 2008 12:38 AM #13


I have a client who wants to bid on an FHA short sale. She wants to increase the sales price to roll in her closing costs. The listing agent says that the seller is not allowed to pay any concessions on an FHA short sale. He says that it's in the HUD guidelines. I have never heard of this before. Can you please let me know if this is true. Technically, my buyer is paying the closing costs because it will be rolled into the loan.

Oct 10, 2008 02:12 PM #14
Wendy Rulnick
Rulnick Realty, Inc. - Destin, FL
"It's Wendy... It's Sold!"
Directly from the HUD site. Hope this helps.
16.Page 12, Item G(4)(d) of Mortgagee Letter 94-45 indicates that
among the expenses deducted from the gross selling price to
obtain the net sales proceeds are "local/State transfer taxes/
stamps and other customary seller's closing costs.  This
apparently conflicts with language contained in Attachment D to
the Mortgagee Letter ("Approval to Participate/Property Sales
Information/Property Occupancy & Maintenance") which says that if
the seller negotiates to pay all or any portion of the discount
points or other buyer's closing costs as an incentive to the
purchaser, they will be considered a personal expense of the
seller and cannot be paid from sales proceeds.  It also says that
pro-rated real estate taxes must be paid by the seller
(personally) at closing.  Please explain.  Are there ever
exceptions in deducting these expenses from the proceeds of sale?
There is some flexibility in these matters.  The language in the
Mortgagee Letter was somewhat more accommodating by saying that
what might be a customary seller's cost in certain States or
localities would be a deductible expense, and that sales proceeds
could be used to pay them at closing.  The language in Attachment
D (a form to be circulated widely among PFS participants) is
deliberately restrictive, and was used to avoid creating the
impression among mortgagors, their sales agents, or prospective
buyers that HUD's position was always liberal in regard to seeing
expenses such as discount points paid from proceeds.  Points
and/or pro-rated taxes can be paid from gross sale proceeds, if
(a) they are considered reasonable seller's expenses to
facilitate the sale; and (b) the net sale proceeds are at least
87% of the as-is appraised value of the property.  Strongly
recommended is a third factor, that a "significant" cash
contribution is being made by the seller from the seller's own
incentive toward these or other expenses of the transaction.
There may be situations where points are very high because of
interest buy-downs, or where other costs drive the net sale
proceeds below 87%.  If it can be argued that a prospective sale
would not occur "but for" the payment of these additional
expenses from proceeds, and the seller is already contributing a
significant part of the seller's consideration toward repairs,
discharge of liens, and/or discount points/taxes, the local HUD
Office may decide to grant a variance from the 87% criterion, and
authorize an additional expense drawn from the sale proceeds to
achieve the sale.  (See below.)
Oct 11, 2008 02:22 AM #15
Evan Seeley


I'm  currently in a signed contract with a seller on an FHA short sale.  The seller had agreed to pay 2 points on closing and a $400 home warranty.  The bank (who originally approved the offer) has called me 4 days from closing and said they will not pay any closing costs.  After doing some research, I understand that as a servicer of the loan, the bank may be under obligation to HUD to not pay any closing costs.....BUT I have a signed contract that I believe must be honored.  The bank should legally be forced to pay for these costs out of their own pocket.  if I show up in four days at closing and the bank refuses to sign.....can I take them to court for breach of contract?  Another concern is; would I be taking the bank to court or the seller (who has no money because he is short selling his house)?


I have until Thursday.



Oct 27, 2008 05:35 PM #16
Wendy Rulnick
Rulnick Realty, Inc. - Destin, FL
"It's Wendy... It's Sold!"

Evan, I highly recommend you contact an attorney immediately.  

Oct 28, 2008 05:21 AM #17

I have FHA property that is occupied and I want to do short sale and they will not allow this.

I don't want to walk away but they will not allow this sale.  What can I do beside letting it go into foreclosure and walking away.


Dec 01, 2008 11:53 AM #18
Wendy Rulnick
Rulnick Realty, Inc. - Destin, FL
"It's Wendy... It's Sold!"

Denise -  Does your bank offer any other options,such as loan modification,  forbearance, etc?  Otherwise, seek the advice of an attorney.

Dec 01, 2008 10:17 PM #19
Jonathan Osman
Jonathan and Associates, Inc - Charlotte, NC
Charlotte House Hunter Group

Wendy, You're Awesome.  This info is great!  Thanks for posting and keep it up

Dec 12, 2008 01:44 PM #20
Gene Allen
Fathom Realty - Cary, NC
Realty Consultant for Cary Real Estate

Thanks for the info.  It is hard to get this kind of information and your posts are always appreciated.

Dec 15, 2008 06:32 AM #21
Wendy Rulnick
Rulnick Realty, Inc. - Destin, FL
"It's Wendy... It's Sold!"

Jonathan - Thank you much!

Gene - Thank you, sir!

Dec 16, 2008 07:27 AM #22
Kathy Torline
ERA Herman Group Real Estate - Colorado Springs, CO
Colorado Springs Real Estate Blog 719-287-1049

Great info -- a couple of these facts I didn't know.

Dec 17, 2008 10:54 PM #23
Wendy Rulnick
Rulnick Realty, Inc. - Destin, FL
"It's Wendy... It's Sold!"

Thanks, Kathy. 

Dec 17, 2008 11:44 PM #24
Jeff Payne
The Payne Group at Keller Williams Success Realty - Panama City, FL
Panama City Real Estate

Great information Wendy!!  Are Gennie Mae guidelines the same as FHA guidelines.  I have a short sale that is a Gennie Mae backed loan and Countrywide is confused for some reason.  Any help is appreciated.  Keep up the great information!

Mar 24, 2009 03:05 AM #25
Wendy Rulnick
Rulnick Realty, Inc. - Destin, FL
"It's Wendy... It's Sold!"

Hi Jeff!  I don't know Ginnie Mae guidelines at all!  Sorry, I need to update this info here, too.  Thanks for stopping in.

Mar 24, 2009 03:11 AM #26

well -- just completed my short sale the end of February/09.   Took the lender 5 months....the buyer started out at $ 135,000 for the property..then the lender foreclosed on a property next to mine and sold it for $ 121, the buyer backed down his offer to $ 121, property appraised at $ 130,000.....( I owe $ 315,000  )  the buyer came up to $ 125,000 and the short sale was approved and they told the buyer he had one week to close.    I had to pay $ 4,500 to my lender...they would not tell me what for....I had to pay the delinquent homeowners fees of $ 3,000 and my lender paid the other closing costs plus the realtors commissions.     had to sign a letter stating the balance due is a charge off/collectible balance and the recovery department will be in touch with me to make arrangements to  pay the balance.       Have not heard a word from the lender since closing except that I got a letter in the mail today stating "thank you for contacting us regarding your credit report and an update has been submitted to the credit bureaus to reflect the loan was a charge off/collection.    I never even contacted them !   I lost over $ 100,000 in 2 years in my down payment, interest payments and real estate taxes paid....they got fair market value for the property and I am going to an attorney to fight the lender on the "charge off /collectible balance because I was forced to sign the letter or go to foreclosure they said. They were even lucky I got a buyer for the property and they received the money at closing.  I don't have money to pay any collectible balance and will not.     

Mar 24, 2009 12:15 PM #27
Wendy Rulnick
Rulnick Realty, Inc. - Destin, FL
"It's Wendy... It's Sold!"

Sue - I bet they will not contact you about any deficiency.  What a nightmare.  Who was the lender?

Mar 24, 2009 02:20 PM #28

Hi Wendy - An attorney negotiated the deal for me...and every thing he suggested to them...the answer was NO.  It was either their way..or the highway !   He asked to waive the deficiency...they said No.  He asked for forgiven debt with a 1099C...they said NO.  They initially wanted me to sign a promissary note at closing....but wouldn't disclose how much...that was really scarry !....and then all we get is a short sale appproval letter I must sign stating they must net a certain amount...closing in 7 days,  I need to pay them $ 4,500 and pay the homeowners fees of $ 3,000 (so I had to use ALL my emergency savings to pay this)  and the balance would be charged off/collectible on my credit report (with no amount listed as to what that balance is.)  The buyer scrambled with his lender to get his financing in 7 days and closed.  I checked my credit report on the 1st of March and under  Rate Status Section it said BAD DEBT, PLACED FOR COLLECTION, SKIP !! (which is obviously a BIG LIE )  and then on Comments on Account Section - it said Charge off Account.  Under High Credit Section it said $ 315,000 ,  under Balance due it says 0 and under Past due section it says 0.

Then I checked my credit report again on March 13th and now under Rate Status Section it says -Payment after charge off/collection.  And on Comments on Account Section - it says "Paid profit and loss."   Under High Credit it now says N/A.....Balance N/A and  Past due it is now 0. 

So -- WE have no idea even what the deficiency would be that is placed for collection.  I actually talked to the negotiator for the lender to verify some information regarding my income (which is barely nothing this past year ) months before we got the approval and he said they take the $ 315,000 balance I owe x 85% = $ 267,750.00 minus the net proceeds of the short sale which came to $ 112,000 to them....he said I owed approximately $ 155,000.    We worked diligently with them on the short sale and abided by their terms....then they slammed my credit report as bad as they possible could and now we don't have a clue as to what their next step will be and how much they claim I  STILL owe ...   Not my fault the property was worth only 1/3 in value of what I paid for only 2 years ago.  The LENDER should be grateful they got anything and did not have to spend the money to foreclose.

Mar 25, 2009 01:39 AM #29
Kira Angel
Equity Oregon Real Estate - Canby, OR

Thank  you for the guidelines, it is nice to have them alll spelled out like that.  I actually found the HUD short sale I did was easier because they had the guidelines in place.   I am hoping the new HAFA program will make short sales with other servicers easier as well.

Dec 31, 2009 02:53 AM #30
Clason Whitney
Coldwell Banker Pro West Real Estate - Medford, OR
"Your Proactive, Trusted Real Estate Advisor"

Good comments on here and great explanation from you, this is a good post to learn a thing or two about short sales.

Mar 03, 2010 09:57 PM #31
Brady Howard
The Cascade Team Gig Harbor - Gig Harbor, WA
Managing Broker, The Cascade Team Gig Harbor

Thanks Wendy, these are hard and the more everyone knows the easier they will become.

Aug 17, 2010 07:05 AM #32
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