Short Sale Seller Questions

QUESTIONS A SHORT SALE SELLER MAY HAVE

What is a short sale?
A short sale is when your Lien Holder(s) agrees to accept less than you owe in order for you to sell your home. They agree to a discount of the mortgage debt owed.

Why do lenders or banks accept discounts?
A Lender or bank takes a discount or agrees a short sale because it saves them money. It gets bad debt off their books so they can reinvest that money by giving out another loan to a customer. On average a Lender loses between $30,000 to $80,000 on each property that they take back as a foreclosure.

Will every lender or bank allow a short sale?
The answer is no. The majority of the lenders do short sales however; there are a select few that do not participate in short sales.

Who qualifies for a short sale?
Most everyone who is facing a true financial hardship qualifies for a short sale. However, each Lender and Loan Type has a different set of requirements specific to them. The general requirements for a seller to qualify for a short sale are: A provable financial hardship, behind on payments or facing imminent default, No equity in the property being shorted, no liquid assets, and a lender or loan type with a clearly defined short sale process.

Will Lenders or Banks do short sales if the mortgage is current?
Some Lenders will entertain taking a discount when a homeowner is current on their mortgage. If you are current on your payments, we recommend you contact an attorney to explore your options prior to making any changes.

How long do I need to be in default before I can start a short sale?
This depends on the Lender. Some Lenders require a property to be 90 days in default before they will entertain a short sale offer; other Lenders will entertain a short sale even if it is not in default. If you can prove that defaulting on your mortgage is definitely foreseeable in the near future, lenders are more inclined to consider your sale.

Can the owner of the property also be the listing agent?
Good Question! There is absolutely nothing wrong with that set up. However, the owner or spouse of a short sale can not profit from its sale. So, you can not earn and keep any commissions for the sale.

What is required to process a short sale?
Every Lender or Bank has its own set of required information and some may even have a set of
paperwork specific to them. But, in general, most banks require at least the following:

  • A handwritten hardship letter or hardship affidavit
  • Financial statements
  • 2 years tax returns
  • 2 months bank statements
  • 2 months pay-stubs

Throughout the process additional paperwork may be requested. So, be sure to keep everything handy.

What is the process?
The steps of the process are always changing with new government and bank guidelines. We’d be happy to talk with by phone or appointment to give you the most current information. There is no charge for this service and we are happy to help.

Can 2nd Mortgages or junior liens be discounted?
Yes, absolutely. In fact, if the first mortgage is being asked to accept a discount, they will require that all other lien holders discount as well in order to give short sale acceptance.

If you have any more questions please don’t hesitate to reach out.

– Lindsey

*If your lender is operating under HAFA guidelines, the rules and qualifications will be much different than described above. See: HAFA Short Sale Info

Lindsey Brown P.A
EWM Realty International
305.494.3398

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