Emotional Stress of a Short Sale

What a seller is to expect in a Short sale
I started talking about Short Sales about a year ago. The Short Sale transaction can be frustrating for everyone involved. I think most of the frustration comes from expectations not being met. The short sale is not your every day real estate transaction. This is relatively new territory for most real estate agents and definitely a new venture for the seller. This should be one of your last resorts. Talk to your bank. You might be able to renegotiate your mortgage. Again, back to my point banks don’t want to own real estate, they just don’t realize it yet. They are going to fight you tooth and nail to keep the current condition and hope you find a way to pay. A well trained real estate agent in foreclosures and short sales will be able to assist you in this process.
There are a few things that you should be prepared to do before venturing into a short sale transaction. The bank has to qualify you for a short sale. Remember, they are going to ultimately take a loss on this. Therefore, you have to establish a hardship, if they approve, they will pass this short fall onto you as a 1099 at closing. The IRS sees this as income to you and expect you to pay taxes on it. (Tax laws are changing on this regularly, check with your Tax preparer) You might not have to anymore.
Your agent will be needing a copy of a few things from you to help streamline the whole process.
Authorization to talk to you lender(s)
Most recent mortgage statement.
Most recent tax return.
Two most recent pay stubs.
Bank Account Statement(s)
A Hardship letter written in your own words.
The banks will want to see these items in order to consider your request. If there’s a second mortgage, most likely both will have to agree on a settlement before approving the short sale. Remember you agent will do their best to get the approval, but there’s no guarantees that they will accept it. It is not uncommon for one or the other lender to force it to foreclosure. The loss mitigation department sometimes have a mind of their own. They have secret formulas that they use to determine which route is more beneficial to the bank.
Your sellers agent will submit this again with another pile of documents when an offer comes through. It makes it easier on the Loss Mitigation Officer to see everything at one time (again or maybe for the first time) They have hundreds of these request coming across their desk monthly. The more your agent is organized, the quicker the response time to the sale approval. I say quicker with a little tongue and cheek. The approval process could take anywhere from 30-60 days. You don’t need any more delays than that. Especially if the foreclosure process is closing in on you. Buyers and Buyer’s agent need to be aware of this. We’ll talk about their expectations next week.
This is an emotional process, your agent should be able to help keep things in perspective and work through the hiccups of the transaction. Ultimately, you want to get someone who understand your situation, very patient and has your interest.
Watching out for your deficiency waiver and credit are both very important issues that an agent has to address. I just ran a credit on a short sale that I closed, this client had about a 720 Fico prior to the short sale, once we had closed the short sale. Their credit dropped to around 650, and both 1st and second loan showed “Account Settled”, which is what I negotiated for and got. I am very happy with the turn out of this clients credit. However, any foreclosure or short sale they will have to wait three years to be able to get another home loan.
Please call me for your inquires or concern, Call Ken Go (Short Sale Expert) of 1st Innovative Finance Group at (562) 697-7028 or write to: Kennethgo@verizon.net. Thanks for your inquiries.