Friday, February 29, 2008

What is a Short Sale???

Here is the "official definition" of a short sale

Qualifications for a Short Sale

Before you eagerly climb aboard the short sale bandwagon, consider the following to determine whether you may qualify for a short sale. If you cannot answer yes to all four requirements, you may not qualify for a short sale.

The Home's Market Value Has Dropped.

Comparable sales must show that the home is worth less than the balance due the lender. This unpaid balance may include a prepayment penalty. Have your Realtor do a CMA or BPO on the house to be sure. A Realtor will do a CMA for free. Some lenders might require a appraisal.

The Mortgage is in Default.

A lender will not consider a short sale if the payments are current. As long as the lender is receiving timely payments, the lender is satisfied. You should probably be 60-90 days late on the mortgage payments. Please contact your lender direct to see if they will work with you to get the payments current. Some are being more helpful than others. Some may take a partial payment or even forgive a payment to help you. Call yours TODAY if you're late. Don't bury your head in the sand!

The Seller Has Fallen on Hard Times.

The seller must submit a letter of hardship that explains why the seller can not pay the difference due upon sale, including why the seller has stopped making the monthly payments. This letter should give details about the sellers situation. Maybe you've had medical issues? Maybe a divorce is in the works? Tell your lender your situation!!

A few examples that do NOT constitute a hardship are:

Bad purchase decisions. OOps. I paid too much for this house! Not good enough...
Unhappy with the neighbors. Does their dog keep you up at night barking? Not good enough...
Buying another home. The lender will not care if you have decided the home is no longer suitable for you or your family. We found a real bargain in a brand new home that the builder was liquidating! Not good enough...
Pregnancy. Increasing the size of your family or starting a family is not considered a hardship. Enough said! Not good enough...
Moving into an apartment. If you decide to move out of your home, because you can't afford it, this is not a good reason to leave your home. This just doesn't qualify as a hardship...not good enough... I think you get the picture.

Examples of hardship are:

Unemployment Did you lose your job?
Divorce Enough said......
Medical emergency / sudden illness Do you have medical bills even though you have health insurance? Let your lender know.
Bankruptcy Enough said...
Death Did your spouse die? Let your lender know!

The Seller Has No Assets

The lender will want to see a copy of the seller's tax returns and / or a financial statement. If the lender discovers assets, the lender may not grant the short sale because the lender will feel that the seller has the ability to pay the shorted difference.

For example, if the seller has cash in a savings account, 401K, owns other real estate properties, stocks, bonds or IRA accounts, the lender will most likely determine that the seller has assets. The short sales that get accepted are those where the seller has no money or assets. In other words, they have NO OTHER OPTION but to sell the house at a loss.

I can't give you legal advice, unfortunately, I'm not an attorney. I strongly recommend that you speak to an attorney if you're considering selling your home as a short sale. If you can't afford an attorney, I have contact info for agencies that will advise you for free or reduced prices.

I was fortunate enough to be able to attend a seminar offered by NEFAR on this issue. The class was taught by one of the best communicators I've ever had the pleasure of listening to. This was my second seminar that Ulrich Leinhase, GRI, has presented. He is the President and CEO of Real Estate Classes Florida. I tell people that he is the Guru of Real Estate Seminars. I learn more in his classes than in any others and appreciate NEFAR for offering his classes on a regular basis.

Please don't wait too long to get some input on this issue you're facing. The worst thing to do is not face it square on! A caring, knowledgable Realtor can help you get things started. Oftentimes, this does NOT lead to you selling your house!! The lenders may work with you. Call me today and let's see where things stand. I'll be happy to help in any way.

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