What Is a Short Sale?

Attention homeowners!

There is a lot of information in the media right now about the housing market, about the government’s policies and procedures for helping homeowners facing tough times, and about options available when you are having trouble making mortgage payments.

In this short article, I will attempt to clarify one of the options available: short sale.

A short sale is when a bank or mortgage lender agrees to accept a discounted payoff on a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank’s Loss Mitigation department. The homeowner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender has the right to approve or disapprove of a proposed sale.

Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower’s financial situation.

A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the homeowner, the advantages include avoiding foreclosure on their credit history. And, in the state of California, there are new laws that provide additional benefits to homeowners (Senate Bill 458). Additionally, a short sale is typically faster and less expensive than a foreclosure. In fact, many banks have short sale incentive programs because they realize that a short sale might be the way to go.

In short (pun intended), a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount.

Currently, short sales have become increasingly more common with defaulted mortgages on the rise, and a significant number of subprime loans adjusting over the next few years.

A short sale is one of many options available to those who are having trouble making ends meet and are “upside down” on their mortgage. It is the principal option available to those who are unemployed or who have faced a significant decrease in income.

If you are considering listing your home in a short sale, consult with a qualified Realtor® who has significant experience negotiating short sales. This agent’s contacts at the bank will go a long way towards resolving your situation as quickly and efficiently as possible.

Originally posted at http://servingsandiegocounty.com/short-sale/what-is-a-short-sale/

Keep the Utilities On!

You have moved out of your home, but the property isn’t going to close and be transferred to the new buyer for another month or so. You want to save a few bucks. So, what do you do? You turn off the utilities. You cancel the trash pickup and the water service. You tell the pool service to take a hike.

It’s July. With no water service, the landscaping is going to go south fast (and I’m not talking about a Mexican vacation.) When a prospective buyer makes an offer on a home, they make an offer based on the condition of the property at the time that the offer was written. What is the buyer going to say when he comes back and all the plants are dead and the pool is green? How is the buyer going to complete his property inspection you cannot turn on the lights or flush the toilet?

If the property does not look the same as when the offer was made, the buyer has a right to cancel the transaction. Doing that would be very disappointing.

So, as you can see, the key is to leave the utilities on whenever possible. If your agent forgot to discuss that with you, that’s a serious bummer and it may cost you some cash. If you turn off the utilities and then have to turn them on again, there may be a surcharge—money you could’ve saved if you would have left them on in the first place.

If you are really strapped (perhaps you are in the midst of a short sale and times are tough), the best thing to do is to discuss this problem with your listing agent. Tell your listing agent that you cannot afford to maintain the utilities and the property. Strategize with the listing agent (and perhaps even with the buyer and the buyer’s agent) in order to find a happy medium. You may be surprised. Another pool party may be in your future.

Originally posted at http://servingsandiegocounty.com

Trials and Tribulations of Vacancy

With so many distressed properties on the market (both short sales and bank-owned foreclosures), it’s not uncommon for neighborhoods to have vacant homes. In fact, I passed one on a walk just yesterday morning and was wondering why on earth the listing agent had left the curtains open—making it so brutally obvious that the home was vacant. I mean why not put out balloons and a sign that says Looters, Please Come Visit Soon.

If you are a short sale seller who is in the midst of moving and who will be vacating a home, know that the home still belongs to you until the property transfers or is sold.For many short sale sellers, this means that you may have to continue to keep up with the utilities, the Homeowner’s Association, the lawn maintenance, and other obligations associated with the upkeep of the property.

Another concern with respect to a vacant home has to do with security. In certain parts of the United States, vacant homes are taken over by all sorts of characters. Also, in rural areas, plants and other items can magically disappear from properties that are vacant and in more remote locations. While this situation is extremely unfortunate, it is often hard to avoid. One solution to this problem would be to hire a house sitter to reside on the property until it is sold and the short sale transaction has closed.

Ultimately, the issue of security is the responsibility of the owner of the property. So, sellers who have to move should make arrangements to assure the security of their property during the tough transition. When in doubt about how to proceed and best protect the property, consult with a qualified Realtor® who might be able to make some suggestions about how best to avoid an unfortunate situation.

Originally posted at http://servingsandiegocounty.com

What is Included in a Short Sale Package?

If you are a seller who is interested in selling your home as a short sale, you must be prepared to provide some information to your mortgage lender in order for the lender to approve the short sale. Despite the fact that the information is not wrapped in a box, it is called the short sale package.

Although different mortgage lenders require the seller’s documentation at varying times in the process, it is important to have all of the information below at your disposal in order for your agent to work with the bank and process the short sale.

Here is what you need (it hardly ever varies from lender to lender–although some lenders may have their own forms for some of the items listed):

  1. Authorization (letter authorizing whomever is negotiating the short sale to speak with the bank on the borrower’s behalf)
  2. Financial Statement (itemized list of monthly income and expenses)
  3. Hardship letter
  4. 2 months bank statements
  5. 2 years tax returns
  6. 2 recent pay stubs
  7. Listing Agreement
  8. Purchase Contract
  9. Estimated Settlement Statement (HUD-1) (required so that the bank can see the bottom line—how much they will receive at closing of the transaction)

It can be difficult to pull together this package, especially if you have many borrowers because the entire package is required for each borrower on the loan. However, I guarantee you that if you prepare the documentation thoroughly and early in the process, the short sale process will move along a whole lot more smoothly.

Originally posted at http://servingsandiegocounty.com

Why Do a Short Sale?

Many borrowers wonder, “Why bother with a short sale? Shouldn’t I just let my property go to foreclosure?” – In most cases, the answer is ‘no.’

Short Sale (For Sale)

A short sale is a much better alternative to foreclosure or a deed-in-lieu of foreclosure because a short sale is usually less harmful to your credit and your future ability to borrow.

A foreclosure will remain on the credit report for up to seven to ten years. With a foreclosure on your credit, it usually takes 5 years before new mortgages may be obtained.

The benefit of a short sale is that you may be able to purchase a new home in 2 years or less. Additionally, many loan applications ask whether you have had a previous foreclosure or bankruptcy.

So, if you own real estate and you are considering the alternatives, a short sale may have a better impact on your future ability to borrow.

Originally posted at http://servingsandiegocounty.com/for-sellers/short-sales/why-do-a-short-sale/