What is a short sale? A short sale is when an offer is accepted on a property where the sale proceeds are less than the amount owed, inclusive of sale costs and other fees.

How does the short sale process work? The short sale process begins once a final purchase agreement is signed and agreed by all parties. It is then submitted, along with all of the required documentation from you (the short sale package), to the lien holder within 24 hours. Once the bank has received all necessary documentation, they will review your file to make sure it is within guidelines. They will then submit all information to a department that will negotiate the short sale.  This department orders a “BPO” or Brokers Price Opinion to determine market value. The bank may also need to coordinate with the title companies, attorneys, mortgage insurance companies, public trustees, etc. for the approval of your short sale. When we get the approval from your mortgage company(s), we will contact all parties involved.   A closing date will be scheduled and the escrow and due diligence process will begin.

This process can take months, depending on your bank(s).  Our job is to keep everyone informed.  You, along with the other parties involved, will receive weekly updates.

How do I know this will work?  You don’t.  We cannot make any promises to you that this will work.  Once you’ve missed a payment, the bank can proceed to foreclosure.  However, we know that the bank wants to avoid foreclosing on homes, and we are very good at presenting alternatives to the bank.  We make no promises as to whether a bank will accept a short sale – they may or may not.

Can I stay in my home?  The purpose of a short sale is to get the property sold. So, you will need to plan to move.  This is not a program that can stop a foreclosure and allow you to keep the house.  You can stay in the home during the marketing period of the sale.  However, in some cases, it is easier to show and sell the home if the owner has vacated.

How will this affect my credit?  Most lenders tend to report “settled” upon successful closing of a short sale.  Recent reports state that if a borrower misses 2 – 5 mortgage payments, their credit score will be affected by an estimated 30 to 60 points.  If a borrower suffers foreclosure, it can affect their score 140 – 200 points.

Will I get any money from the sale?  No.  A universal requirement of Banks in granting a Short Sale is that the borrower(s) will not get any proceeds from the sale of the property.  The Bank is taking a loss on your loan.

Do I have to pay anything?  In most cases, we can negotiate that your account will be “satisfied” without additional payments or promissory notes.  Some banks will only issue a “release”, which means the bank releases the house for sale.

What is a “Release”?  The bank may offer to “release” it’s security interest against the property in exchange for less than the total amount of the notes.  A release will allow the property to be sold without paying off the obligations of the note.  However, this note is not satisfied.  Advantages:  This successful short sale will allow the property to be sold and thus avoid a foreclosure.  Disadvantages:  The remaining debt on the property (sometimes called a deficiency) still exists.  You are still liable for the note – in other words – you still owe the money.  Reality:  It is not likely that the Lender will pursue the deficiency unless you have other significant assets, and if you don’t try a short sale and the property goes to foreclosure, you are going to have a deficiency anyway.

What is a “Satisfaction”?  The bank may agree to accept less than it is owed as complete and total satisfaction of the note and release it’s lien against the property.  Advantage:  Your note and obligation to the Bank are satisfied for less than you owe.  When the property is sold, the debt is paid off completely.  Disadvantages:  You may have some tax consequences that you should discuss with your tax advisor due to the fact that the bank is making money you owe disappear.  Sometimes our negotiations are successful in obtaining satisfaction.  Sometimes all we can get is a release.

How do the Realtors get paid?  We negotiate directly with the bank on commission payment for both the Listing Broker and the Buyer’s Broker.  The bank pays this fee once your home has successfully sold.

Why would the lender accept a short sale?  Lenders do not want to have any more “bad debt” on the books.  Plus, foreclosures are expensive with legal fees and procedural duties.  A foreclosure could cost the bank an additional $40,000 to $50,000.

What are some reasons my short sale wouldn’t get approved?  Short sales are unlikely if you, as the seller, have experienced the following:

ü      If there is no hardship that has led to delinquency of the loan.  This needs to be documented, such as a job loss or significant decrease in income, divorce, relocation or illness.

ü      Current on your loans with no plans of missing a payment.

ü      If you are in Chapter 7 or Chapter 13 Bankruptcy or plan to file Bankruptcy.

ü      If you have completed a recent refinance with cash out and soon after decide you need to sell (Home Equity Line of Credit’s have the same effect).

ü      If you cannot provide a complete short sale package with documentation.

ü      If there are outstanding liens or judgments that cloud title from private parties.  Most lenders will not allow more than $1,000 - $2,500 to go to these junior lien holders.  This could include pool or landscaping contractors.

ü      If you are less than 60 days from foreclosure sale.  This means you would have already received your Notice of Default.