Misc News

Most homeowners are unfamiliar with the concept of a short sale, so you may need to give them a crash course on this process.

The lender will not consider a short sale unless there is no equity and the seller can not repay the loan balance. The lender may require the seller to demonstrate that previous attempts to sell the property have failed.

The seller cannot receive any money from the proceeds in a short sale. Sellers may also be responsible for taxes if the lender sends them a form 1099. Explain to the seller that the difference between the loan balance and the amount received in the short sale may be declare as income on their income tax return.

A short sale involves demonstrating that the owner is insolvent or unable to continue making his payments. Proving this requires forwarding the lender stacks of documentation including all personal financial information.

The lender will also require a BPO, a Broker’s Price Opinion indication what the real estate professional believes the true market value of the property is and what it can be sold for. The lender will also require a closing statement, title report, and a signed copy of the purchase agreement from buyer to seller. The lender may also require a copy of the buyer’s loan application or preapproval letter.

1. Locate loans in default and research outstanding balances, other lien, and property ownership
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2. Contact the borrower and put a deal together

3. Have the owner complete the authorization form and purchase contract.

4. Call the low mitigation department at the bank and request requirements.

5. Forward all requested information to the lender in the form of a well-prepared proposal.

6. Negotiate your best deal.

7. It the lender accepts your offer; send a completed short sale proposal to the lender for approval. The deal isn’t done until the lender accepts and agrees to it. Remember that the lender must agree to the deal in writing, issuing an approval with terms, conditions, and closing instructions.

Not everyone qualifies for relief via a short sale. The borrower generally needs to…

Be in default, and clearly demonstrate that he cannot cure the default.
Show that hardships disallow him from qualifying for forbearance or modification agreements.

Convince the lender that the property cannot sell for enough to cover the outstanding loan balance.

In addition, the loan and lender’s criteria must permit this solution (not all do).

Most short sales occur when the outstanding property loans are greater than what the property can be sold for and it is clearly demonstrated that the borrower (owner) can’t afford the property under any circumstances.

Lenders may make attempts to create forbearance or loan modification agreements with the borrower. It the default cannot be cured in any way and the debt is greater than what the property can be sold for and the borrower exhibits hardship conditions, the property is ripe for a short sale.

Lenders seeking to mitigate their losses and avoid becoming property owners created the basic idea for this transaction. The number of lender-approved short sales seems to coincide with real estate crashes.

First and always, lenders are not in the real estate business and do not want to own property. They know the costs of repossessing properties through foreclosure, and that the time, effort, and future costs of maintaining and disposing of properties is expensive.

If a lender is going to experience a loss of foreclosing and owning a property, it makes sense that it would be better off to minimize its loss and walk away before it even needs to take ownership of the property. Ultimately it can be easier and cheaper for the lender.

A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report out comes for the borrowers. This agreement ,however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, know as the deficiency.

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Do what should be done,
When it should be done,
As well as it can be done, and
Do it that way all of the time.
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A person without regrets is a nincompoop.
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