What is a Short Sale?

• A Short Sale (also called a pre-foreclosure sale) occurs when an investor/mortgage company (Lender) accepts less than the full payoff on a mortgage(s) to allow the home owner the ability to sell the house at or below Fair Market Value.

• Short Sales require prior approval from the Lender.

• Lenders only allow Short Sales on mortgages that are “Non-performing” (delinquent) and if the Borrower proves they can no longer afford the home.

• Properties marketed and sold using the Short Sale method are normally priced below Fair Market Value because the home owners owe more on the mortgage than what the property is worth (“upside down”)

• Short Sales are negotiated on all mortgages and junior liens (1^st and 2^nd liens, tax liens, mechanic’s liens, etc.)

When Will a Lender Consider a Short Sale?

• When a mortgage loan is delinquent by 30 days or more days and default (foreclosure) is imminent.

• When a homeowner has experienced a hardship (divorce, job loss, illness, adjustable interest rates, etc.) and can no longer afford mortgage payments and no other alternatives are available.

• Selling the property for less than the total amount due requires prior approval from the investor/mortgage company (Lender).

• A cash contribution toward any loss to the investor may be required. There may also be other requirements depending on loan circumstances. The short/pre-foreclosure sale has to be proven (documented) as a tangible hardship.

Why Would a Lender Consider a Short Sale?

• Lenders are in the business of loaning money, not managing and selling real estate.

• Foreclosing on a property and maintaining the foreclosed property is expensive. Lenders would much rather cut their losses early by reducing the home owner’s payoff and sell the property prior to foreclosure.

• Non-performing loans (delinquent and foreclosed loans) dramatically reduce what a lender can loan in the future.

Why Would a Homeowner Consider a Short Sale?

• The homeowner has experienced a hardship (divorce, job loss, illness, adjustable interest rates, etc.) and can no longer afford mortgage payments and no other alternatives are available.

• The timeframe to market and sell the property is normally shortened because the sales price is generally below market value, giving potential home buyers a sense they are getting a great “bargain” and the property sales faster.

• Home owners can compete with foreclosure properties for sale in their neighborhoods that are also sold below market value.

• The Short Sale keeps the home owner from going through the embarrassing event of foreclosure.

• The Short Sale will report more positive than a foreclosure on the home owner’s credit bureau reports.

Life after a Short Sale / Pre-foreclosure Sale:

• Consult your CPA or tax preparer for possible IRS ramifications. You may need to file IRS form 982 to claim insolvency when you file your taxes.

• The Lender may require the seller to agree to a settlement outside of closing for the difference in the amount of the sale and the full payoff.

• Following a Sale, the Sellers’ credit may report as follows: Settled, Paid, Short Sale or Offer and Compromise

• Home owners should make sure they have confirmed with the Lender what they will be responsible for and how the transaction will report to their credit after the sale.

FROM OFFER TO COMPLETED SALE

To begin the Short Sale process, I will:

Negotiate the terms of the Short Sale diretly with your Lender to obtain the approval;

• I will contact your lender to verify the status of your loan, obtain the Lender’s Short Sale requirements and provide your lender with the information they require in order to place the property on the market for sale using the Short Sale method. If the foreclosure sale date has been scheduled, I will work with the Lender to post-pone the foreclosure and allow time to market and sell the property. [Timing is critical when using the short sale process. Especially if the foreclosure sale date is within 10 days of my first contact with the Lender. Therefore, it is imperative to provide all requested documentation immediately to the Lender]

When our marketing efforts bring a purchase offer, I will:

Negotiate the agreement;

• Explain the offer to you and answer your questions.
• Help you determine the best course of action by pointing out potential advantages and disadvantages of the offer and clarifying the choices available to you.
• Prepare an Estimate of Net Proceeds based on the proposed price and terms.
• Negotiate through the buyer’s agent, and handle possible counter offers, to reach a final agreement that is favorable to you.

Complete the transaction:

• Explain to you in detail all the steps that will occur for a successful closing, and answer any questions you might have.
• Work with the buyer’s broker, settlement officer, title officer and others to help coordinate their activities and keep the transaction moving forward.
• Monitor progress of inspections, the buyer’s loan and other contingencies as called for in the purchase contract. Resolve questions or problems that might arise, in order to ensure a timely closing.
• Accompany the buyer and buyer’s agent during their final walk-through of the property.
• Assist you in handling details required for the completion of the transaction.
• Communicate with you on a regular basis so that you can stay informed and as worry-free as possible.

Follow up after the sale closes:

• Confirm that all your real estate-related needs have been met, and provide information on service providers you may require.
• Offer relocation assistance.