Definition: A Short Sale is a sale of real property where the lender allows the sale of the property for less than the amount owed on the Note and Deed of Trust.
WHEN? When the market value of the property is less than the balance left on the loan.
WHY? A Short Sale can save the bank money. The costs to foreclose on a property and resell it at market value often amount to $40,000 or more. As you might imagine, very few properties can be sold at a profit by the bank when foreclosed.
WHERE? These do not happen on the court house steps. Short sales occur most frequently where the listing agent either prices the property right for quick sale on the open market or where the listing agent has investor buyers who are waiting in the wings for a quick purchase. Banks are open to Short Sales in this market, but they are not going to wait around for 2 – 3 months for you to find a buyer. If you cannot sell it quickly they are not going to deal with you.
HOW? Now comes the fun apart. Lenders typically have many different departments that might have the “file” for your Seller. The Seller has often been contacted by the Collections Dept. and the Seller is having a hard time communicating with them and does such interesting things as throughing away letters and not answering the phone. Possibly the Seller has talked to the lender and has been referred to the Workout Dept. and they have been talking to the Seller about making up payments or restructuring the loan. There is also a Department that handles Short Sales. Sometimes it is called the Loss Mitigation or Short Sale Dept.
The Bank will not talk to you about your clients Deed of Trust unless you have them fill out and sign an “Authorization to Release Information” form. Once you have that form you can start to help your client talk to the right people at the lender.
In order for the lender to evaluate the wisdom of working with you and your client to achieve a Short Sale they will want the following items
<!--[if !supportLists]-->1. <!--[endif]-->Authorization to Release information.
<!--[if !supportLists]-->2. <!--[endif]-->Fully filled out Financial Disclosure Form with all assets, liabilities, expenses, and incomes itemized.
<!--[if !supportLists]-->3. <!--[endif]-->“Hardship Letter” (preferably handwritten) explaining what has happened and what the owner wants to do.
<!--[if !supportLists]-->4. <!--[endif]-->Most recent 2 pay stubs for owners’ job(s).
<!--[if !supportLists]-->5. <!--[endif]-->Two months bank statements for all accounts.
<!--[if !supportLists]-->6. <!--[endif]-->Signed copies of last two income tax returns.
<!--[if !supportLists]-->7. <!--[endif]-->Two months loan statements for all loans on the property.
<!--[if !supportLists]-->8. <!--[endif]-->Details about any Bankruptcy and attorney’s contact information.
Sometimes it takes the lender two to three moths to get an approval from management for the sale. You should make sure that all contracts stipulate “subject to lenders approval” and allow as much time as possible for lender approval.
With so much information required it makes sense to get a generic Information Release form signed by the seller and contact the lender so that you use the approved forms for the rest of the list above.
Contact me for a generic Release for if you need it.
Good Luck with Short Sales!
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