A Short Sale is one way of avoiding foreclosure and bankruptcy. It is when the lender accepts less than the loan amount (a discount on the loan) and releases the lien on the property at closing, without requiring the owner to make up the difference. I have made Short Sales one of my specialties, and can guide you through the process either as the buyer or the seller.
If you are a buyer and want to make an offer on one of my short sales, please see the instructions at "Preparing an Offer on a Short Sale".
If you are looking to avoid foreclosure or bankruptcy, and can no longer afford the house you have, please contact me. I have several resources at my disposal to help you with your unique situation. If you have not received a notice of foreclosure yet, you still have several options. Let me help you decide which one is best for you. Email me or call me at 678-907-7034 (or any of the contact information to the left).
In order to qualify for a short sale, the seller must prove to the bank one or more of the following conditions:
Incidentally, these are also the most common reasons for a foreclosure.
Why would a lender accept less than they are owed? Because the alternative is a foreclosure. Just as with the borrower, there are significant consequences to the lender if they foreclose.
Sometimes, some lenders will accept a Short Sale file for approval on loans that are not delinquent. Other lenders will not accept the file until the loan is delinquent.
Yes. In fact, lenders are more motivated to do a Short Sale on a property that needs work than on a property that doesn't. The lender knows the risk of loss goes up when they foreclose on a property that needs lots of work.
A short sale package it used to determine whether a homeowner can afford the property. Most lenders already have a standard package which they will send to the borrower upon request. The borrower is expected to provide financial information to include income and household expenses.
The seller must fill out forms with the Listing Agent to be submitted to start the Short Sale process - and submitted with any offer. These forms include:
The Buyer must provide additional items as well. Full details can be found at "Preparing an Offer on a Short Sale", but the basics are:
Before, the Seller was sometimes required to declare the difference between the loan principal and the amount the bank received as income on their tax forms, and pay tax on it. In November 2007, a law was passed that changed this. Effective January 1, 2008, "Forgiven Mortgage Debt" (the difference between the principal and the amount the bank received) is excluded from taxable income. There are restrictions. In order to qualify for this exclusion, the house must be occupied by the owner as a principal residence (not a summer home, vacation house, rental property, etc.). Investors do not qualify.
No. Subordinate lenders are more flexible than 1st mortgage holders.
When you have 2 loans with the same lender, it is more beneficial to them, as there is no need to negotiate with another lender.
When the two loans are with different lenders, the process is a little longer, but the second lender is the one who has more to lose if they don't reach a settlement. This is because if the property goes to foreclosure, the first loan is the first one to be paid and the second usually nets nothing.
No, but it is likely that the lenders' guidelines will prevent them from formalizing a short sale if the loan is not past due,. This means, for them, that the borrower has the means and can continue to pay on the loan each month. Please understand, however, I AM NOT RECOMMENDING THAT ANYONE STOP PAYING THEIR LOANS. In the current market conditions, it is possible that a bank would accept a short sale, even when the borrower is current.
A Broker Price Opinion (BPO) is when the lenders contact their own Broker/Real Estate Agent and pay them to render an option on the condition, value and time on market for the property. This is because many lenders do not have the knowledge of the market in Georgia, because their offices may be in Texas for example.
The lender wants to make sure that a borrower is truly having financial problems and is not one of those people who for various reasons just wants to stop paying for the property and the mortgage debt. If the borrower has liquid funds, the lender will want the borrower to use them in the sales process. The lender also wants to make sure the borrower is not selling the property to a related party for the sole purpose of locking in a reduced pay off. The bottom line is that the lender is going to manage the transaction with the objective of recovering the most money for the lender. The time frames involved cover a multi-step negotiation process between the borrower and the lender with either the lender or borrower objecting to certain terms and making various counter proposals before coming to an agreement. Third party inspections and BPOs will also need to be done before the negotiations can be formalized in an agreement.
This is a letter that explains the borrower's current financial circumstances. Which circumstances have changed from when the house was purchased, and why the mortgage payments can no longer be made. These circumstances are what led to a borrower’s inability to make payments and to pay off the loan in full. This letter must be written by the borrower, and be sincere in demonstrating (with documentation) that it is the truth.
Along with the Hardship letter, each lender will have different forms that we will need to complete. All lenders generally require various items such as two months of bank statements, pay stubs, past tax returns, W2, etc. Usually each Short Sale package that I submit is over 70 pages long.
The time frame for the lender to receive and evaluate the short sale proposal is about 8 weeks from the time the offer and Short Sale Package are received. Buyers need to realize that this is a lengthy process. This is why it is very important to work with a Short Sale Specialist who knows how to manage the transaction. The other agent and the buyer may get cold feet at the end, and the transaction may fall through.
They lose less on a short sale. On average, lenders lose tens of thousands of dollars less on a short sale versus a full foreclosure. It is simply in their best interest.
Yes, but doing it alone and on the phone with the lender leads to inconsistent results that are, frequently, not acceptable to the borrower. Working with us, with written negotiations, yields more consistent results.
In steeply declining markets, short sales are booming. Selling a home for less than the underlying mortgage often provides troubled home owners with their best chance of avoiding foreclosure and ruining their credit. A cottage industry of bankruptcy specialists and other self-described loan mitigators are trawling for clients, but lenders would often prefer to work with real estate professionals in negotiating short sales for clients. Here’s why:
This is why many of my fellow Real Estate Agents refer their in-trouble clients to me, they know I can help their clients navigate the waters they would have to learn first. So let me help you get through it. Give me a call.
You have other options, like a Deed in lieu of foreclosure. That is a perfect case to demonstrate to the lender that if they do not accept a short sale, they are going to lose even more money than they are now.
Please see "Foreclosure Laws" for your state.
Check to see if Deficiency Judgments are allowed in your state. If your state permits a deficiency judgment, this can allow a lender to garnish your wages, attach your other properties and aggressively collect for years to come any amount that remains unpaid after a sheriff’s sale of the property.
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deemed reliable but is not guaranteed and should be independently verified.
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