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What Is A Short Sale?

Itǯs a transaction where two unique events must occur together.

›
 
  

A short sale occurs when your net proceeds from the sale is insufficient to cover
your note balance(s).

›
  

The lender(s) agrees to release its mortgage lien(s) and note obligations on the
home in exchange for payment less than the full loan balance.
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Why Would A Lender Agree To A

Short Sale?
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The discounted payoff of the short sale must be less than the lenderǯs cost to
foreclose.

Ȉ Legal fees on foreclosure

Ȉ Title closing of property
Ȉ Holding of property until a successful resale
Ȉ Maintenance of property until a successful resale
Ȉ Commission & marketing cost of resale
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Why Would A Lender Agree To A

Short Sale?
›
  


The lender will agree to a short sale if the seller can prove distress.

Ȉ Seller is in default on mortgage

Ȉ Seller can document financial distress
Ȉ Seller has a firm sale which generates insufficient proceeds
Ȉ Seller sale provides no net to seller
Ȉ Seller proves current market comparables support sale price
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Why Would A Seller Want To Do A

Short Sale?
   

². The Government recently passed HAFA (Home Affordable Foreclosure

Alternatives) that is a Godsend for homeowners underwater.

2. With HAFA, the Government requires homeowners are released from their
debt, and any future liability from their Lender.

3. Financial Incentives are provided: $²

for you, $²


for the Lenders, and
up to $3


for any additional lien holders.

4. The process has been streamlined, and is MUCH faster now than ever before.
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Why Would A Seller Agree To A

Short Sale?
 

. It has less of an impact on your credit rating than a Foreclosure or Deed-In-

Lieu of foreclosure.

6. Your lender may stop reporting missed payments to credit agencies.

7. Provides more time for you to act in this difficult situation.

8. You may buy another home sooner as compared to a foreclosure.

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What Must A Seller Do To Prepare For

A Short Sale?
The following is a checklist of what you need to gather to begin the process of a Short Sale.
Ȉ Hardship letter à Late bills summary
Ȉ Appraisal Ȉ Medical bills
Ȉ Deed Ȉ Divorce decree
Ȉ Financial information worksheet Ȉ Child support payments
Ȉ Statement of Assets & Liabilities Ȉ Unemployment benefits
Ȉ Net worth summary Ȉ SSI income
Ȉ Copy of property tax bill ȈAuthorization to sell
Ȉ Copy of 2 recent bank statements Ȉ Homeowner association information
Ȉ Copy of 2 recent pay stubs Ȉ Other to be determined by lender
Ȉ Copy of 2 recent IRS tax returns
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What Is The Short Sale Selling

Process?
². Homeowner signs listing agreement with real estate agent.

2. Agent finds buyer who offers less than note owing.

3. Homeowner accepts buyerǯs offer.

4. Homeownerǯs lender accepts buyerǯs offer.

. Transaction closes when the buyer delivers the funds, the lender releases the
lien, and the Homeowner delivers the deed.
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What Are The Qualifications For A

Short Sale?
Can you say yes to the following 4 questions?

(²) Has your Homeǯs Market Value Has Dropped?

(2) Have you already missed a payment, or foresee the possibility of missing
one?

›3) Are you in Hardship of any kind?

(4) Is your debt (including your current mortgage) more than your assets?
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What Constitutes & Triggers

Hardship?
². Unemployment

2. Divorce

3. Medical emergency

4. Sudden illness

. Death

6. Bankruptcy

7. Increase in mortgage payment due to resetting of ARM(s)

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What Does Not Constitutes

Hardship?
². Bad Purchase Decisions

2. Unhappy With The Neighbors

3. Buying Another Home

4. Pregnancy

. Moving Into An Apartment

6. In-Laws Coming To Live With You

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How Is A Short Sale Different From A

Normal Sale?
(²) Marketing

There is no difference. Weǯll utilize our extensive marketing program.

(2) Buyers

There is a big difference. Short sale buyers are price sensitive & driven.

(3) Home Pricing

There is a big difference. Appraisal is based upon other short sales comparing
apples to apples.
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How Is A Short Sale Different From A

Normal Sale?

(4) Other MLS Agents

Only Agents and their buyers will know you are in short sale.

( ) Sale Impact

Having buyers and agents fully aware of the short sale status increases the
likelihood of a fast sale.
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What Are The Consequences of a

Short Sale?
(²) Potential IRS Tax Consequences

If the lender agrees to the short sale, the lender may possess the right to issue you a
²
 for the shorted difference due to a provision in the IRS code about debt
forgiveness.

Ȉ Many situations are exempt from debt forgiveness, according to the

Mortgage Forgiveness Debt Relief Act of 2

7.
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What Are The Consequences of a Short Sale?

(2) Deficiency Judgment

The lender has the right to pursue a summary Judgment for the deficiency.

Example

The bank was owed $3

,


and sold short for $2²
,


. The deficiency is $
,


. The lender sues the
seller for the deficiency.

With HAFA, Lenders must agree not to pursue this option.

(3) Blemished Credit Record

Short sales will show up on credit reports as a pre-foreclosure in redemption status.

The typical short sale will affect credit up to 2 years and 4
-6
points, while a
foreclosure -7 years and 2
-3

points.
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Which Is Better, Foreclosure or Short Sale?

Fannie Mae: August 2

8

Due to the increased incidence of pre-foreclosure [short] sales, Fannie Mae is

establishing a 2-year elapsed time period for reestablishing credit following
completion of the action.

A foreclosure client must wait to 7 years, maintain at least a 68
credit score in
the sixth and seventh year, and pay a minimum ²
percent down on future home
purchase.
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What Are The First Steps To A Short

Sale?
². My Role

As a Realtor I cannot give you legal or financial advice as both fall outside the scope
of my license. It is for this reason I strongly recommend also consulting with an
attorney and CPA before you make a final selling decision. The 3 keys to successful
short sale are: disclose-disclose-disclose!

2. Lender Requirement

You must prepare and submit a Short Sale Approval Application Kit with your
lender before you can begin selling as a short sale.