WHAT IS A SHORT SALE & DO I QUALIFY? The definition of a property eligible for a short sale is when a homeowner owes an amount on his property that when combined with closing costs and commission is higher than current market value. The definition of a homeowner that is eligible for a short sale is someone who has a material change in a financial situation that is or will affect their ability to pay their mortgage. A homeowner has to show acceptable financial hardship. Examples of an acceptable hardship are: 1. Loss of Job 10. Medical Bills 2. Business Failure 11. Military Service 3. Damage to Property 12. Payment Increase or Mortgage Adjustment 4. Death of a Spouse 13. Too Much Debt to Income 5. Death of Family Members 14. Insurance or Tax Increase 6. Severe Illness 15. Income 7. Inheritance 16. Separation 8. Divorce 17. Incarceration 9. Mandatory Job Relocation A homeowner MUST prove a financial hardship to the bank in order to be considered for a Short Sale. Proof of this hardship is not difficult to provide if it is accurate. A short sale is a way to avoid foreclosure and not a “get out of my mortgage free card”. A homeowner without a financial hardship that is upside down on the mortgage and wants to sell is not a potential short sale, but is only a dissatisfied homeowner. A foreclosure has far reaching and regulatory consequences that most people are not aware of. A short sale occurs when a negotiation is entered into with the homeowner’s mortgage company or companies to accept less than the full balance of the loan at closing. A buyer closes on the property and the property is “sold short”. If you meet the above qualifications the next steps are as followed: 1. Find a Realtor experienced in short sales and hire a Realtor only with short sale experience. Only YOU AND YOUR REALTOR can do the following. We are short sale specialists. And, we work with an attorney who will give you a free 1 hour consultation so that you can make the right decision, and know that you are doing things properly. Call us and we will set you up. 727-287-0083. (Florida Residents). 2. Since many banks are requiring your property be listed for at least 60 to 90 days before they will consider a short sale make sure your property goes on the MLS immediately. 3. Send your bank(s) an authorization that allows your Realtor to speak with them regarding your account. As your Realtors we work with an attorney. His office works with the Bank to Negotiate on your behalf. 4. At our first meeting with you, the homeowner, we have a complete detailed package to help you proceed with your bank in a short sale with our professional guidance and representation. Since time is of the essence in a short sale the sooner you start to work with your Realtor the more opportunity of success you will have. The package necessary for the Bank will include: A) Hardship Letter B) Two Years Tax Returns & W-2’s C) Two Most Recent Bank & Retirement Account Statements D) Two Most Recent Pay Check Stubs E) Current Financial Statement F) Any Documents Supporting The Hardship G) Financial Worksheet from the Homeowner H) Current Market Analysis (CMA) & Market Conditions J) Listing Agreement K) Listing History (MLS details the time on market & price reductions) L) A Copy of the Executed Sales Contract with Buyers Proof of Funds or LSR 5. Upon receipt of the entire package the bank will send an appraiser or Real Estate agent to complete a BPO (Broker Price Opinion) of value. 6. The Bank will determine at that point if a short sale is in order and if the offer will be accepted or countered. 7. A Short Sale process is not a quick or easy one but it is worth the effort to avoid a foreclosure. Answers to Some of Your Questions
Why would the Bank allow a Homeowner to complete a short sale and take a loss on a property? This question is one of the most common misconceptions that homeowners and Realtors have regarding short sales. Banks are not lying in wait ready to jump out and take your house. Banks are not in the business to take homes back. Banks are in the finance business only not in the Real Estate business. In fact a foreclosure has far reaching financial and regulatory consequences for banks than most people are not aware of. How much will my bank sell my home for in a short sale? You still own the property and can be living in the property during this process. You and your Realtor will negotiate the offer(s) that come in and only when you and the buyer have a “meeting of the minds” do we send the offer to the lender. The bank will receive the offer along with the complete package we put together. The bank will review all information in the package. The bank would like for the home to sell at market value, not loan value. (Loan value is probably higher than market value). Our package will prove to the bank what the market value is. Can I sell my home if I have two loans, a first and a second? Yes, sometimes. This does complicate the situation but it is worth trying. A second loan on the property does include a Home Equity Line of Credit. We have been able to negotiate with the first and second on properties and have been able to come to an agreement workable by all three parties, bank(s) and homeowner. Is there a Tax Consequence to doing a Short Sale? Possibly! When completing a Short Sale, possible tax issues can arise for the homeowner. The owner considering a Short Sale should be encouraged to discuss these issues with an attorney or tax accountant/CPA. In 2007 a bill, “The Mortgage Forgiveness Debt Relief Act of 2007” was overwhelmingly put into place and signed by President Bush. This bill has been extended through 2012 to help homeowners in a short sale/foreclosure situation. The bill permanently eliminates tax on up to $2,000,000.00 of debt for a principal residence. There are a few non-eligible circumstances that would need to be dealt with. Your tax accountant or attorney can be most helpful and guide you through this situation. Is there really a difference between a Short Sale and a Foreclosure? Absolutely! Please see the chart below. If the Bank accepts my Short Sale is my Foreclosure canceled? Yes. Can I recover credit wise from a Short Sale? More than likely in 24 months you can purchase a home again. What do I do next? Great Question! The best thing you can do, at this point, is call us. We are a team of agents that specialize in helping people just like you. Time is of the essence so do not delay, call or e-mail us today and we will meet with you immediately. Craig & Toni Weidman
727-237-0083 email: toni@toniweidman.com |