What is a short sale?

A “short sale” real estate transaction is one in which a homeowner sells his or her property for less than the balances owed on the loans or liens against the property. In other words, selling when you are “upside down”. A short sale transaction does require the consent and approval of all parties (typically banks) that hold liens against the property. And in many cases, there is more than one loan or lien against the property.

Why would a lien holder or bank agree to take less than what is owed?

It’s purely a business decision based on the lien holder’s assessment of whether or not approving a short sale will result in less of a loss than a foreclosure. There are many factors that will determine the true amount of a lenders loss but that is beyond the scope of this discussion. I can explain and discuss this in a a free personal consultation.

Who can request a short sale?

Any property owner with liens can request a short sale but not all requests are approved. See below for more information about approval and denial of short sale requests.

What are the advantages of a short sale vs. a foreclosure?

The most significant advantage involves a lenders right to RECOURSE. (See explanation below). Other advantages include; less damage to your credit rating than a foreclosure, staying in the home longer, preservation of the property value, no foreclosure stigma and preservation of personal dignity.

What is lender recourse?

Recourse is the lenders right to pursue you for the losses they incur from a foreclosure. That’s right! A lender can legally pursue you for their losses. The only exception is if the loan being foreclosed upon was the loan given to originally purchase the house. This is called a Purchase Money Loan. ALL refinance loans and Equity Lines of Credit are NOT considered Purchase Money Loans. That means if you EVER refinanced or took out an equity line then you could be pursued for the losses cause by a foreclosure. NOTE: A short sale transaction eradicates the lender’s right to recourse.

How does a short sale affect my credit rating vs. a foreclosure?

A short sale is typically reported to the credit agencies as an account “settled for less than owed”. Although this is a derogatory mark on your credit, the impact is considerably less damaging than a foreclosure. Many mortgage lenders will allow you to purchase a home again in as little as 1-3 years assuming that you have maintained a good credit record since the short sale.

Who should not do a short sale?

You should not do a short sale (in fact you can’t) if you are in or planning to declare bankruptcy. Also, in certain cases, if the property was not your primary residence for 2 of the last 5 years. NOTE: In some of these cases is OK and wise to do a short sale. More in depth analysis is needed for these cases and I can explain in a free personal consultation.

Does it cost anything to do a short sale?

In general, all the costs associated with selling a property such as broker commissions, transfer taxes etc are absorbed by and paid by the lien holding bank. These costs are part of the agreement and factored into the overall losses and therefore factored into the decision to grant or deny a short sale. In a few cases there are some small costs that select lien holders will not pay and they typically amount to less than a few hundred dollars.

Does Neil Case charge anything to conduct a short sale?

I do not charge anything other than the customary broker’s commission but I do employ a professional short sale negotiator to submit the short sale package to the lien holder. This is a 3^rd party licensed broker named Short Sale Pro and she does charge a flat fee of $750. So, although I charge nothing, there is a cost when you hire me to do your short sale. It’s just not paid to me. I get paid when and only if we successfully close your short sale. If I fail I get nothing!

Why do you use a 3^rd party to submit the short sale package?

Everybody has strengths and weaknesses. Much like a baseball team has 9 positions, you wouldn’t want one player trying to play all the positions. My strengths are working with you, marketing your home, dealing with legalities and negotiating with the buyer. I am not good at and don’t enjoy spending hours on the phone listening to elevator music. Short Sale Pro has completed hundreds of transactions. They know exactly how to package your file so that it does not get rejected or delayed. Remember every bank has different rules and because Short Sale Pro does nothing but work with these people all day, every day, they know each bank and the banks know them. If you’re going to apply for a short sale you certainly don’t want to do all the work just to have it fail. This greatly improves our chances of success.

What is required to qualify for a short sale?

The primary factor needed is a true and immediate hardship. You must be able to prove to the lien holder that you are unable to make the payments on the loan. You can not apply for and be granted a short sale just because your house is upside down or you don’t want the property any longer. If you earn enough money to make the payments on the current loan or to make the payments on a modified loan, then your short sale will probably be denied.

How do I demonstrate a hardship and that I cannot make the payments?

You will be required to submit a package containing your financial information that is much like the package submitted when you applied for the loan. You will need income verification such as paystubs or deposits, tax filings (usually last 2 years) and bank statements to reconcile your income and spending patterns. In addition you will need a hardship letter explaining how you got into the situation, a financial worksheet detailing your income and expenses and potentially any documentation from your employer verifying any loss of income or layoff.