Avoid Foreclosure: Sell your Home as a Short Sale

Are you a Tampa Bay homeowner that's having trouble making your mortgage payments?  A short-sale is not an easy way out, but it is an alternative to foreclosure.  If you are interested in selling your home as a short sale, please contact us for more information.  There are many ways to lose a home but signing away ownership in a manner that destroys credit, embarrasses the family and strips an owner of dignity is one of the hardest. For owners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or foreclosure proceedings. One of those options is called a "short sale."

What is a short sale?  The easiest way to explain it is that its like being "upside down" in your car, but you are upside down in your home - maybe you bought a home for $300,000 and now its worth only $250,000 and you are struggling financially, so you can't sell it at $300,000, and you don't have an extra $50,000 to make up the difference.  In a short sale, you are asking the lender to take less than what you still owe on the mortgage, and forgive the difference.  Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose.

For your protection, we suggest that all borrowers:

Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect.

• Call the Lender:  Call your lender and ask for the loan modification department first - if you are still interested in keeping your home and just want to reduce your mortgage payments.  If you do not qualify for a loan modification, or have to move for some other reason such as a job relocation, etc., you should ask for the loss mitigation department and tell them you are interested in obtaining the information necessary to pursue a short sale.  We can also do this for you if you like. 

• Letter of Authorization:  As your Realtor, I will have you sign a letter of authorization to your bank allowing me to speak to them on your behalf.  For this letter I will need the following information from you:
  
  
  • Property Address
  • Loan Reference Number
  • Your Name
  • The Date
  • Social Security Number

 
• Preliminary Net Sheet:  This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any. As your Realtor, I will prepare this for you. If the bottom line shows cash to the seller, you cannot normally proceed with a short sale.
 
• Hardship Letter:  This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment.  State that you have tried to sell the home for what you currently owe on the loan but due to the market have been unable to do so.  Also state the reason for the hardship, such as job loss, failed business, adjustable rate mortgage skyrocketing, illness, divorce, military duty, medical bills, etc.
 
• 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.  As your Realtor, we will need from you a signed financial worksheet, copies of the last two years tax returns/W2's, at least 3 months worth of bank statements and paystubs, or if self-employed, a profit and loss statement.
 
• 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). We will prepare this for you, which will show prices of similar homes: Active on the market, Pending sales, and Solds from the past six to twelve months.
 
• Purchase Agreement & Listing Agreement.  When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to allow payment of certain items such as home protection plans or termite inspections.

Now, if everything goes well, the lender will approve your short sale. As part of the negotiation, you might ask that the lender not report adverse credit to the credit reporting agencies, but realize that the lender is under no obligation to accommodate this request.  Are you ready to list your home as a Short Sale?  Contact us today to start the process, or for a free consultation.