Short Sales
A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.
As a Realtor I suggest that all borrowers call an accountant to discuss tax ramifications and
obtain legal advice from a real estate lawyer.
If we are going to take short sale listings the seller needs to contact their mortgage company/bank and send a letter of authorization giving permission for the Realtor to talk with the parties about the loan. The letter should contain Sellers name, account number, address of property and the agents name, contact information and office information.
· Other information that the bank will need from the seller is a hardship letter.. They need to describe how you they got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized or a truck ran over your entire family, but lenders are not particularly empathetic to situations involving dishonesty or criminal behavior.
· Proof of Income and Assets
It is best to be truthful and honest about your financial situation and disclose assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lender are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.
· Copies of Bank Statements
If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it's probably a good idea to explain each of those line items to the lender. In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.
· Comparative Market Analysis
Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a comparative market analysis (CMA). Your real estate agent can prepare a CMA for you, which will show prices of similar homes
o Active on the market
o Pending sales
o Solds from the past six months
We have been dealing with short sales in our office and I believe there will be many more considering the “creative financing” that lenders have been doing for the past few years. For our buyer and sellers we need to be informed and be pro-active
Some of this blog references information from an article by Elizabeth Weintraub