Avoid Foreclosure: The first step is to contact your lender and ask for the loss mitigation department. Ask to receive all options available. Options such as forbearance, payment workout, refinance, short sale, and deed in lieu.

How to avoid a foreclosure by doing a short sale.

What is a Short Sale? When the amount owed to the bank is more than what the house will sell for. This causes a shortage amount. This leaves a remaining balance owed to the bank. The investor/bank has to agree to take less than the entire balance of the loan.

What if there are two mortgages? A short sale can be done on both mortgages.
Have you dealt with non mortgages attached to a property? Yes I have. I was able to short sell a house that had two mortgages, an automobile loan and a credit card debt.

Can investment properties be short sold? Yes!

IRS Liens against your real estate? Yes….the IRS has a authorization form for your real estate agent to talk to them. Release of the lien tied to the real estate is possible in order to complete the sale. It does not alleviate you from the amount owed to the US Treasury.

Does the Bank’s name go on the Sales Contract or Listing Agreement? The individual that owns the house is the person that will be on the sales contract and the listing agreement. The person that is on the “Deed” is the seller. The “Bank” is not on the deed.

I hear that an investor has to approve the short sale and not necessarily the bank. Most banks, mortgage companies, lenders sell their loans to either another bank or other financial entity (investor) and not necessarily a bank. Most times the company that you send your mortgage payment to is just the “service provider” meaning that they collect and process the payment on behalf of the investor. The investor may be an entity that is not in the United States of America. Many times the final decision is made by the investor and sometimes the investor’s business procedure is to only make these short sale decisions once or twice per month. The role of the bank’s negotiator is to package a short sale proposal in accordance with the guidelines set forth by the investor or bank. The negotiator attempts to put the best short sale package together to send out for approval and if the short sale package does not fit the parameters it is not sent to the investor.

What happens to the remaining balance? It is a loss to the investor/bank. The investor may require a cash contribution paid at closing by the seller. The bank may ask the seller to make nominal monthly payments on a portion of the remaining balance and the payments can be made at a zero interest rate.

Must the homeowner agree to the Short Sale Approval terms? The answer is no. If the approval asks for a cash contribution from the seller, the seller can make a counter proposal. Part of your sales contract should include a “Short Sale Approval Contingency”, spelling out that the short sale approval terms must be agreeable by the seller.

Short Sale Selling Process: First off, no two short sales are alike. First, start out by looking at foreclosure alternatives as quickly as possible. Waiting until you have received a foreclosure notice, “Lis Pendens”, makes it more difficult to execute a short sale. Once the foreclosure process is started it continues even if you have a purchase agreement from a buyer. It becomes a race between the short sale being approved before the foreclosure sale date. The second step is to put your home up for sale with a short sale specialist. You are looking for an experienced agent and not just an agent with a short sale designation (there is a difference). Get the home up for sale. Put the home in the best possible condition as you can. TIP: Do Not Put a “Short Sale” Sign in the Front Yard as it tends to scare buyers away!!!! Let me say that again putting a “Short Sale” Sign on the property is a bad idea!!! The third step is to monitor the number of showings per week. Make price adjustments as dictated by the market and any showing feedback. TIP: The first 30 to 45 days on the market are critical. The longer the home sits on the market the less likely it is to sell. Finally, get an offer on the home. Negotiate the highest price as possible. All parties involved in the sale must sign the agreement. Electronic signatures are not acceptable for most short sales. TIP: Take backup purchase contracts. The short sale specialist will hold these backup contracts in file and will only submit the backup contract if the first contract is not successful. Once a Purchase Agreement for your home is obtained it is time to work through the short sale lender’s negotiator. The short sale approval process can range anywhere from 30 days to a year. I have had some take as little as 30 days and one that took 15 months. You and the Buyer must know that this is long process. You should plan on at least 90 to 120 days to receive a decision from your lender. Once we receive short sale approval it is normal that the approval letter will give us 30 to 45 days to close the transaction. Be prepared to continue to submit financial documents throughout the process. The time frame is influenced by the knowledge of your real estate agent. Your real estate agent also needs to set the expectations of the buyer and or buyer’s agent.

Do I Pay Seller Closing Costs and Commission? All typical seller closing costs are paid by the short sale lender. This includes the professional fee/commission. The typical costs are: deed documentary stamp tax, owner’s title policy, pro-rated property taxes, professional fee, county recording of corrective documents, and any seller relocation assistance money if applicable.

Do I Need to Make Repairs to the Home? The answer is no. The “short sale” is an “as is” condition sale. This is a good discussion point with your short sale specialist prior to putting the home up for sale. If you have the money to fix things, then go ahead and do it. At a minimum clean the house.

Short Sale or Foreclosure? A foreclosure will have a more negative impact on your credit report (Deficiency Judgment). Not making mortgage payments is what causes your credit score to be impacted the most in a short sale. It is possible to do a short sale while your mortgage is current (financial hardship must be substantiated).

Deficiency Judgment: Some homeowners get to a point of just giving up on a short sale thinking that if they just hand over the house to the bank that their worries are over. The loss that your lender will take is greater in a foreclosure therefore causing the shortage amount to be even greater. This leads to a greater Deficiency amount. After the foreclosure, there is a possibility of a greater Deficiency Judgment filed against you. In a foreclosure, there will be the attorney fees, late fees, penalty fees, accrued interest, house maintenance, even the yard maintenance, etc., that will be tacked onto the amount of the deficiency. Just giving up is not in your best interest. All lien holders may file deficiency judgments.

As your Agent I am relying on you from start to finish to cooperate and to have a positive attitude of success despite the circumstances. I never give up and I (we) expect clients to never give up. Surrendering is not part of my vocabulary, thoughts, or in my DNA.

YOU, the seller must be willing to cooperate with your agent throughout the process. This is probably the most important aspect of the whole process that can be controlled by You.

My Team

Surety Land Title – Preliminary Title Work to find any other possible liens against the property. Other liens attached to the property can be auto loans, credit card debt, contractor bills, etc. The closing agents at Surety Land Title have a wealth of short sale knowledge.

Buyers – Real Estate Cash Paying Investors.

Vendors – Electrician, Plumber, Handyman, Roofer, Landscaper, and Cleaning Crew.

Free Confidential Consultation please contact me at (850) 554-9543 or Email: Jack@PensacolaAreaProperties.com

Resources:

Fannie Mae Loan Look Up Know Your Options why walking away should not be your mindset.
Freddie Mac Loan Look Up

Foreclosure filings are still happening….please call me so I can help you. Call me at (850) 554-9543 for a confidential consultation.

For Financial or Legal advice please consult with a professional in those fields.