Short Sale Resource for Homeowners

A short sale is a transaction in which a lender allows the real property securing the loan to be sold for less than the remaining mortgage amount due and accepts the proceeds as full payment of the loan. A lender may accept a short sale when the borrower is in severe financial straits and market conditions make a short sale the best choice to mitigate the lender’s damages. This saves the lender the costs of foreclosure and the borrower avoids having a foreclosure on their credit report.



THE SHORT SALE PROCESS

1. The borrower consults with a real estate agent—preferably one who is short sale certified—to determine whether they may be good candidates for a short sale. If yes, then they hire the agent to put the property on the market.

2. A buyer enters into contract with the borrower to purchase the property.

3. The borrower and their agent assemble necessary documents, including the purchase contract, to submit to the borrower’s lender(s). This is called the “short sale package.”

4. The lender(s) will acknowledge the short sale package(s), then send out their own appraiser to make sure that the buyer’s offer is at fair market value.

5. The lender(s) will make a determination on whether or not to agree to the short sale. If they do agree, then they will issue a letter specifying the terms of their approval.

6. The buyer opens escrow.

7. Upon close of escrow, payoffs are disbursed to the borrower’s lender(s).



4 ELEMENTS OF SHORT SALE SUCCESS

NUMBER OF LOANS
How many loans are on the property? A short sale involving only one mortgage will be much simpler than one that involves two mortgages plus three equity lines.

THE BANKS INVOLVED
Some banks, like Wachovia, are renown in real estate circles for simplifying and expediting the short sale process. Yet there are others that could be difficult or nonresponsive when approached for short sale approval.

SELLER’S FINANCIAL HARDSHIP
The seller must demonstrate current or impending financial hardship. And it must be verifiable.

BUYER’S OFFER
Does the buyer’s offer reflect fair market value? If the bank(s) don’t believe they’re getting a fair price, then they won’t approve the short sale. Importantly, the buyer must be willing to wait a reasonable period of time while the seller is applying for short sale approval from the bank(s).



IS A SHORT SALE RIGHT FOR ME?

As an APR Short Sale Certified agent, Eric is there to help. No one should face financial hardship alone. If you—or a friend or neighbor in need—are considering a short sale, then contact Eric by filling out this form.

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FURTHER READING

Foreclosure Rescue Scams Short Sale versus Foreclosure Options to Avoiding Foreclosure
Short Sale Legal & CPA References Tips for the Short Sale Seller Short Sale Deficiencies
Taxation of Foreclosures and Short Sales What is HAFA?



USEFUL LINKS

Certified Distressed Property Expert – HAFA site
California Association of Realtors – short sales consumer alert
Fannie Mae – Deed-for-Lease program
Fannie Mae – loan lookup
Fannie Mae – HAFA site program
Freddie Mac – loan lookup
Freddie Mac – HAFA site
HUD – FHA short sale forms library
HUD – FHA supplemental short sale guide
HUD – FHA site
IRS – Mortgage Forgiveness Debt Relief Act and debt cancellation
National Public Radio – interactive foreclosure map
Home Affordable Modification Program