What should a seller expect in a Short sale

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Relieving stress with short sales and foreclosuresWe started talking about Short Sales last week and I said we would break it down for the seller and the buyer. The Short Sale transaction can be frustrating for everyone involved. I think most of the frustration comes from expectations not being met. The short sale is not your every day  real estate transaction.  This is relatively new territory for most real estate agents and definitely a new venture for the seller. This should be one of your last resorts. Talk to your bank. You might be able to renegotiate your mortgage. Again, back to my point banks don’t want to own real estate, they just don’t realize it yet. They are going to fight you tooth and nail to keep the current condition and hope you find a way to pay. A well trained real estate agent in foreclosures and short sales will be able to assist you in this process.  Again I want to repost my disclaimer.

Disclaimer; I am not a tax expert, CPA, financial planning expert, nor a lawyer. I suggest before you decide if a short sale is right for you, that you seek professional advice from your CPA, tax expert and lawyer. What I am giving you here is a peek into what could happen if this is the right choice for you.

There are a few things that you should be prepared to do before venturing into a short sale transaction. The bank has to deem your situation worthy of a short sale. Remember, they are going to ultimately take a loss on this. If they approve, they will pass this short fall onto you as a 1099 at closing. The government sees this as income to you and expect you to pay taxes on it. (Tax laws are changing on this regularly, check with your Tax preparer)  You might not have to anymore.

Your agent will be needing a copy of a few things from you to help streamline the whole process.

  1. Authorization to talk to you lender(s)
  2. Most recent mortgage statement.
  3. Most recent tax return.
  4. Two most recent pay stubs.
  5. Bank Account Statement(s)
  6. A Hardship letter written in your own words.

The banks will want to see these items in order to consider your request.  If there’s a second mortgage, most likely both will have to approve the short sale.  Remember you agent will do their best to get the approval, but there’s no guarantees  that they will accept it.  It is not uncommon for one or the other lender to force it to foreclosure.  The loss mitigation department sometimes have a mind of their own.  They have secret formulas that they use to determine which route is more beneficial to the bank.

Your sellers agent will submit this again with another pile of documents when an offer comes through.  It makes it easier on the Loss Mitigation Officer to see everything at one time (again or maybe for the first time)  They have hundreds of these request coming across their desk monthly.  The more your agent is organized, the quicker the response time to the sale approval.  I say quicker with a little tongue and cheek.  The approval process could take anywhere from 30-60 days.   You don’t need any more delays than that.  Especially if the foreclosure process is closing in on you.  Buyers and Buyer’s agent need to be aware of this.  We’ll talk about their expectations next week.

This is an emotional process, your agent should be able to help keep things in perspective and work through the hiccups of the transaction.   Ultimately, you want to get this property off your books.  So you can regain control of your life.

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February 13, 2008 · Filed Under Frederick Foreclosure, Frederick MD Real Estate, seller

Comments

7 Responses to “What should a seller expect in a Short sale”

  1. Linda Davis on February 13th, 2008 12:50 pm

    You forgot to add the part about having the patience of a saint.

  2. gotbob on February 13th, 2008 1:08 pm

    Linda, you are right. But that would of been a copyright violation. :)

  3. Jack Boardman on February 14th, 2008 7:04 am

    I can add nothing of value to your post–except that as the “Spousal Unit” of an RE practitioner I understand the issue form that point-of-view!

  4. gotbob on February 14th, 2008 7:08 am

    Jack, You probably have more to add than you realize. The guys you work with are affected by todays market. Last stat I heard around here was 1 in a 189 homes were in foreclosure. That number most likely has changed.

  5. Jack Boardman on February 14th, 2008 5:55 pm

    “T” finally got the attention of city officials by emailing her blog post about the difficulty in selling foreclosed houses this yesterday (Wednesday). Unoccupied homes quickly become blight and hurt the surrounding neighborhoods.

  6. Putting a Short Sale together - what’s all the paperwork | Focus On Frederick.com on March 12th, 2008 7:42 am

    [...] I have mentioned in previous post about Short Sales, there are a few items that the seller will need to accumulate in order to submit a Short Sale Package to the bank.   The topic about short sales have been on the tip of everyones tongues recently.  [...]

  7. Sell My House on March 31st, 2008 4:05 pm

    It is always a good idea to submit more information that just what is asked….give the mortgage company your CMA or market analysis. If the house needs things fixed up, then submit your bids from certified contractors with your CMA. Then the bank will take this fixup cost into consideration when figuring their NET.
    Thanks,

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