What is a Short Sale?
A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others, the homeowner must make arrangements with the lender to settle the remainder of the debt.
It’s important to know your options and understand all the potential solutions that may be available to help you avoid foreclosure or bankruptcy.
What are Some Short Sale Benefits?
There are many benefits and seasoned programs to help distressed homeowners who wish to pursue a short sale. Programs sponsored by state governments as well as lenders offer relocation assistance to qualified homeowners. To enroll in relocation assistance programs, call at 1-800-760-9156
Some of the benefits for short selling your home:
1. Government sponsored relocation assistance is available to qualified homeowners. Learn More
2. Lenders are offering monetary compensation for homeowners who short sale. The major lenders who settled a lawsuit, including Bank of America, Chase, and Wells Fargo are offering some homeowners up to $30,000 for short selling in certain situations. Other lenders offer different benefits.
3. All costs associated with performing the short sale are paid by your lender. This means there are no out of pocket expenses for you when you perform a short sale.
4. By law, all mortgage debt is considered forgiven when the short sale is completed. This means that your lender cannot come after you for any remaining mortgage balance.
5. California laws and clarifications by the IRS allows you to avoid paying taxes on a short sale in most situations. Learn More
6. You are allowed to live in the home until it is sold.
7. Lenders are not permitted to foreclose on your home during the short sale process.
8. A short sale is less detrimental to your credit than a foreclosure.
9. Outstanding deficiency judgement, such as HOA, can be forgiven or negotiated through a short sale settlement. Foreclosures can allow the opportunity for a lender to come after you for any outstanding debt still owed.
Please note: If you file for bankruptcy, you may lose these benefits.
Are your services really offered at no-cost?
By representing you in the short sale process for your home, the lender will pay the listing commissions we earn working to sell your property. This includes commission earned by the buyer’s agent. All closing costs, unpaid taxes, commissions, and secondary lien payoffs are negotiated to be paid out of the closing proceeds. This means there is no-cost to the homeowners for our short sale services. We will at no time ask you for money to perform a short sale. Occasionally a client may have to pay a notary or shipping fee when dealing with certain documents, but these costs are normally under $20 dollars.
In a normal real estate transaction, it is common for the seller to pay for some home repairs after inspections are completed. In a short sale transaction, however, a home is offered as-is and no repairs are to be paid by the seller. We will even try to get you relocation money through various Government and bank programs.
Applying for a Short Sale
The initial process involves paperwork and forms, which we will send to you to fill out and return. You will be sent a standardized listing agreement and advisory forms, which are provided by the C.A.R. (California Association of Realtors). Depending on the number of lenders and which lenders you have, you will also receive short sale authorization forms to sign and return. These forms give us permission to speak to your lenders about your mortgage, begin the short sale negotiation process and allow us to list your property on the California Regional Multiple Listing Service. If you are ready to begin short sale qualification, start by applying below.
What are the Qualifications for a Short Sale?
A short sale is allowed to be performed on all types of properties. From condominiums or retirement communities to farms and single family residences, the main qualification for a short sale is that you owe more on your loan than what your property is worth. Secondly, you must be suffering some sort of financial, physical or mental hardship. Many lenders have dropped the required hardship explanation, however. A qualified hardship can include many things, such as:
· Loss of employment or reduced hours
· Major illness or medical expenses
· Increased bills
· Higher living expenses
· Investment Loss
· Changing loan terms or loan payment increase
· Concerning loan terms/High interest rate
· Inability to save for retirement
· Increased anxiety
· Loss of home equity and inability to refinance
What is a Hardship Letter?
A hardship letter is simply a letter written to the bank explaining why the homeowner would like to pursue a short sale. Our short sale services include helping you prepare and send a hardship letter as part of the short sale application. You can download an example of a hardship letter.
But what if I don't have a hardship?
While some lenders do not require a hardship explanation, other lenders will require at least some explanation of why you cannot pay your mortgage. Our experience is that ALL banks and lenders have very lenient rules about what they consider to be a hardship. Call me at 1‑415‑559‑5660 and we can discuss what type of hardship requirements your lender has, and what you can do if you think you do not have a valid hardship. A common misconception about short sales is that you have to be out of money to qualify. Having cash savings in the bank, or even situations where you are currently making more money than you have in the past will not necessarily disqualify you from a short sale.
Do you Offer Negotiations for Agents?
Yes, I am licensed to provide negotiation and processing services for both homeowners and agents. I am able to process short sales with all lenders, credit unions and lien holders. I can help you avoid hassle and wasted time with our professional negotiation team. My services include:
· Organize and review all necessary documentation
· Obtain required documentation from lenders and lien holders
· Negotiate all liens on title (mechanics, tax, etc.)
· Handle and facilitate all purchase offer submissions
· Follow up with lenders, asset managers and loss mitigation departments
· Track trustee sale dates and obtain postponements
· Provide weekly updates and status reports for important dates
· Coordinate with escrow and title for estimated HUD-1 statements and approval
· Provide accountant references for those with tax implications
What You Need to Know About Short Sales
If you owe more on your loan than your home is worth and need to sell your home, the transaction is called a short sale. You can only do a short sale if your lender approves it, because they must agree to take less money than they’re owed. To qualify, you must prove financial hardship with documentation. For example you could document that you lost your job and no longer have income to cover your housing payments.
You also must work with your real estate agent to provide your lender with sale prices of comparable homes in your neighborhood that recently sold. If your bank approves the short sale after analyzing this data, you can list your home for sale, and the lender must review each offer you get on your home before you can formally accept the offer and close the sale. A short sale will cause your credit score to drop as little as 50 points if you don’t incur any late mortgage payments during the short sale process. Your score can drop as much as 200 points, however, if you do incur late payments during the short sale process.
Rates are the lowest for borrowers with top-tier credit scores of 760 or higher, and rise as credit scores drop. Getting a new home loan after a short sale can take as little as two years if you put 20 percent down or more, and as long as four years if you put 10 percent down. However, as credit markets have improved in the years following the 2008 financial crisis, you can find lenders who may lend to you sooner. You will also need to consult your tax preparer for any tax consequences you might face on the part of the loan that was forgiven by your lender.
How Do Short Sales Work for Sellers?
Short sales are an option for homeowners who are underwater on their mortgage to sell their property, and to avoid going into foreclosure. For many distressed homeowners, short sales are an alternative to foreclosure. Here are the steps sellers need to take in order to sell their properties in short sales:
· Provide proof of hardship: When you owe more than your home will sell for, you can’t just list your home to start. You first need to provide proof of hardship to your lender. The two most accepted hardship cases are proof that lower income has made your home un-affordable, or that you’re subject to a mandatory job relocation. When reviewing your hardship case, your lender will analyze your income and assets. If your debt-to-income ratio has risen, it will help your short sale approval. If you have money saved, they’ll require that you contribute these funds to minimize their loan payoff loss. You will also need to provide a market analysis as well as indicate any liens on your property.
· List your property: Once the lender has approved the short sale, you can list your property with a real estate agent. You’ll need to present any offers to the lender for approval. This process can take two weeks to several months. If you have a second mortgage, both lenders must approve each other’s terms, making the process longer.
· Lenders approve the sale of the property: The lenders will review the buyer’s offer and decide if they will approve the sale. Once approved by the lenders, the short sale can close as soon as the buyer can get their loan approved, funded and closed.
What Happens After Closing for the Seller
Typically, your credit score will drop by 75 to 200 points after selling your property in a short sale, which is less severe than a foreclosure. (Experts estimate that a foreclosure will lead to a dip in your credit score of about 200 or 300 points). Lenders often won’t consider a short sale approval for your property until you’re two to three months behind on your payments. This means your credit score drop will be at the higher end of the range if this is the case. The rest of the drop will depend on whether the lender reports the short sale as “settled” debt or “paid” debt. You should try to negotiate for the latter, but the former is more common, and hits your credit score harder.
The short sale will stay on your credit report for seven years, but you can finance a new home purchase within one to four years of a short sale depending on credit score, loan type and down payment. Again, a foreclosure is even more severe. With a foreclosure, that time ranges from three to seven years. Ask your lender to advise on options. Prior to the housing crisis, the lender’s loss was taxed as income for the seller, but now short sellers have no tax liability.
Why work with me?
In the end, I cannot stress the importance of pulling together an experienced team. I can help you do this. Your creditors know that your equity and ability to pay will get burned away if they do not compromise with industry experienced professionals - also, not only do we know your rights, but we know the laws that protect those rights, and when they are being violated. Every situation is unique, and I believe I have the resources to guide you and support you to build the right circle of experts.
I can offer "Honesty, Integrity, Transparency, and Compassion".
and whatever else it takes to get the best value at the least expense.
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Bill was a Godsend. He helped me navigate the sale and closing of my home and business property. He took calls at all hours of the night, and kept me sane when I felt more despair that I could have ever imagined. Bill was a gift, and now a friend for life.
I can't tell you how much I regret not calling someone like Bill sooner. I made the mistake of trying to take the road on my own. I was so embarrassed. Then I called all the wrong people who did not understand my predicament. The good news is that in the end, Bill got the home sold quickly and got me out from under the stress of the mortgage company. Thank you. Bill is a Godsend.