Successfully helping a client through the stress and strain of a short sale situation requires more than just a knowledeable real estate team like ours.  It also requires the work of am experienced bank negotiation team like our local business partner, Significa.  They know who to work with at all the local and national banks, they understand  how to process the tranaction through the time-consuming and confusing maze of bank processes and they have the same compassion and professionalism as the experts on the Barb Bottitta Team. I wouldn’t trust my short sale clients with anyone else.

The following sections describe a short sale situation, highlight the attributes of a successful short sale and list all the documentation needed to start the process.  Please take a few minutes to read this information, then call or e-mail our team to get started on the road to economic recovery and peace of mind.

What is a Short Sale?

A short sale is a transaction in which the owner sells a property for an amount that is less than what is owed on the mortgage loan(s).  The lender chooses to either forgive the remaining debt or release the mortgage while still pursuing the owner for the balance of the loan.  In most cases, a seller cannot receive proceeds from a short sale transaction.

Example

Joe and Sally purchased their home for $300,000 in 2006.  They borrowed $285,000 via a purchase money mortgage.  In 2009, Joe was laid off from his job and Sally had to cut her work hours to care for her ailing father.  Since Joe and Sally fell behind on their mortgage, they asked a real estate agent to list their house.

The agent reviewed comparable sales from the area which suggested that the house was valued about $250,000.  The agent listed the house at $249,900 and soon received an offer for $245,000.  Since Joe and Sally owed about $280,000 and the mortgage was in default, the lender eventually agreed to permit the sale for $245,000.  The lender allowed the agent to receive a sales commission.  Joe and Sally received no proceeds from the sale, but were relieved to avoid bankruptcy and/or foreclosuree.

Characteristics of a Typical Short Sale

1. The property is worth less than what is owed.
2. The seller has a hardship that makes it impractical for the seller to keep the property.
3. The seller understands the advantages of a short sale and is willing to work with a real estate salesperson.
4. The lender is contacted and expresses willingness to consider a short sale.
5. A ready, willing, and able buyer can purchase the property in a timely manner.

How Sellers can benefit from going through the short sale process.

• Closure. People facing foreclosure are inundated with collection calls, threatening letters, and visits from the county sheriff’s deputies.  They no longer want to answer the phone or doorbell, and they dread walking to the mailbox to check the mail.  Selling a property before a final foreclosure action brings the unpleasant calls, letters, and visits to an end.  The seller can move on with their life.
• Dignity. Imagine the shame of having sheriff’s deputies forcibly move you out of what was once your home.  Imagine the awkward looks of the neighbors as you hurriedly throw a handful of possessions into a waiting car or truck.  Imagine seeing the lender’s locksmith changing the locks as you leave the property for the final time.  A short sale allows the seller to have a normal closing and a move on their own schedule.  In most cases, the neighbors won’t know that a seller sold their property via a short sale.
• Closure. A short sale, while damaging to a person’s credit, is less damaging than allowing the property to go to foreclosure.  Settling the debt and ending the delinquent payments allows a person to stop the damage and start rebuilding their credit sooner.  It is important to note that a short sale may affect a borrower’s credit for at least seven years because lenders might report that a loan was settled for less than its balance.  A seller may be able to convince the lender to include a letter of explanation in the credit file that outlines the extenuating circumstances that caused the short sale.  This can soften the blow to one’s credit.
• Avoid Bankruptcy. A mortgage loan is typically the largest debt instrument a person must service.  By selling the property via a short sale, a person might avoid bankruptcy altogether.  A bankruptcy would affect all of the seller’s creditors and be more damaging to the seller’s credit rating.

The following are the documents and information typically needed to execute a successful short sale transaction.

1.  Date of the foreclosure sale, if one is scheduled. Please remember to update us if there is new information regarding the foreclosure sale.

2.  Hardship letter detailing what led to your inability to pay the mortgage loan(s). Please provide supporting evidence. For example, if you had medical problems, please include written documentation of the medical issue.

3.  Copies of your two most recent pay stubs.

4.  Tax returns for the last two years.

5.  Your two most recent bank statements.

6.  Listing contract, if your property is listed for sale.

7.  Real estate property tax receipt / bill (for School and City-Municipal-County taxes)

8.  Home Owner Association (HOA) dues receipt / bill, if applicable.

9.  Copy of the deed.

10.  Contact information for all owners of the property.

11.  Copy of most recent appraisal, if one is available.

12.  Most recent mortgage coupon and/or lender’s contact information.

13.  Most recent water and sewer bills.

14.  Paperwork related to a bankruptcy by an owner, if applicable.

15.  Financial Worksheet.