What is a Short Sale?
Written by: Jose Guerra-REALTOR
If you are currently shopping for a home, you are going to find out that a great amount of the listings on the market are well on their way to foreclosure. If you know what a Short Sale is and how it works, you might be able to get your hands on a great deal.
A Short Sale is a situation in Real Estate where a Lender is about to foreclose on a property and the property has no equity. In most cases, the loan amount is higher than the market value of the property. Everyone involved in one of these situations is on the verge of losing. The Lender is not going to get their loan back in full because after the cost of the foreclosure proceedings and the other related costs of getting the Sellers/Owners who were in default out of the property and reselling it, even a fair market sale price is going to result in a loss.
The Sellers/Owners are in default so they are losing their home, they also are most likely in serious financial trouble. To Buyers or Investors, a Short Sale can be an opportunity to step in and turn this bad situation into a win/win deal for all parties involved. The Buyers or Investors would be making an offer to purchase the property at a price below the market value. In most cases, the offer would be for an amount considerably below market value which would give it the name "Short Sale."
To do a Short Sale, the Seller/Owner, needs to get in touch with their REALTOR®, and if they do not already have a REALTOR®, they need to call us at EXIT REALTY MOUNTAIN VIEW 909-426-EXIT (3948), and ask to speak to one of our REALTOR’S® who will be more than happy to meet with them to discuss what marketing plan they can offer to better their needs. The REALTOR® will need to work closely with a department within the lending institution that is usually called the "Loss Mitigation Department," is the department that deals with loans that have gone bad and that is in-charge of minimizing their loss (some Lenders call this department something else and the REALTOR® might have to be transferred from department to department until they get in touch with the right person). The REALTOR® has to convince the Lender that the best thing to do with the property is to Short Sell it at a reduced price and get it off the books.
The single most important thing in a Short Sale is the negotiation between the REALTOR® and the Loss Mitigation Department. It will have to be proven that the property has no equity. It might also help to prove that that the Sellers/Owners are nice people that are going through some real hardship and deserve a break because they no longer can pay their mortgage, cannot come up with the shortage difference, and are truly concern with their credit rating. A Short Sale is a tough job, but someone has to do it (no REALTOR® can guarantee the outcome of a Short Sale), and here at EXIT REALTY MOUNTAIN VIEW, we are ready, capable and willing to help with the Short Sale process. If an Investor or Buyer is Interested in purchasing a home that is a Short Sale, please get in contact with your REALTOR®, or call us at EXIT REALTY MOUNTAIN VIEW 909-426-EXIT (3948), to consult with one of our REALTOR’s®.
Some questions to ask your REALTOR® before hiring them:
1. Are you a REALTOR® or just a Real Estate Agent?
2. How many Short Sales have you done?
3. How will you present my house to my Lender?
4. How will you list and market my house?
5. How long will the process take?
6. How long will I get to stay in my house?
7. How much will it cost me to Short Sale my house?
8. What will happen if the Short Sale is not successful?
9. How will the Short Sale affect my credit?
10. Will I be liable for taxes resulting from the Short Sale? And if so, can I be forgiven for any of those taxes.
Some items you should have ready for your REALTOR®, if available:
1. Latest mortgage statements and any other letters or notices that you may have received from your Lender.
2. Notice of Default
3. Notice of Trustee Sale
4. A copy of your latest paycheck stubs or proof of unemployment.
5. A copy of your last two years of income tax returns including w-2 and 1099 forms.
6. A copy of the latest bank account statement for all accounts.
7. A copy of your Driver’s License or ID and Social Security #.
8. A list of all your personal property of value (cars, boats, etc…)
9. A list of all your monthly expenses.
10. A letter of hardship (An explanation of why you are in the situation that caused you to have to Short Sale your home).