A SHORT SALE WILL HELP YOU:

• Avoid Foreclosure
• Avoid Bankruptcy
• Protect Credit Score from "foreclosure" ding
• Be free of financial & emotional  burdens

If you are ready to sell your home and free yourself from this debt, call us today for a free consultation.  Short sale requires a trained professional for a successful transaction, so call me today to help you find a solution.

Call Sara at 701-371-6544 or email sara@redribbonrealtors.com.

Common Questions Regarding Short Sales:

Sold up short
How to Succeed at Short Sales

Flat or falling home prices, home-equity credit lines, 100-percent financing that sucked out equity, and spiking interest rates on adjustable mortgages are converging to create a regrettable, but expanding, need for the short sale.

What is a short sale?

A short sale occurs when the net proceeds from the sale of a home are not enough to cover the your mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate practitioner’s commission, and you are unwilling or unable to cover the difference.

Some — although by no means all — short sellers may also be in default on their mortgage loans and be headed for foreclosure. However, home owners who bought at the top of the market or who took out large amounts of equity with a refinance and who now need to sell because of divorce or job transfer may also find themselves upside down, owing more than the home is currently worth when closing costs are factored in.

Tip: Losing your home can be very emotional and most people don’t want to face up to the reality until foreclosure sets in.  Don't fall into this trap!  We can help.

How do I know it’s short?

A CMA will be your first indicator, but we also need to find out your outstanding debt is and calculate the cost associated with a sale — from transfer taxes to your commission. This will give you an estimate of the net proceeds that will be realized, often called the net sheet. This information can then be entered into a HUD-1 Settlement Statement to calculate out the final, negative result at closing. We have the forms and will fill them out with you.

Tip: We'll get a permission letter signed by you, and send it to the lender so we can have access to discussing the loan/loans with them. 

Tip: We will contact the bank’s loss mitigation department, which will be the group to decide whether to accept a short sale

What information will the bank need to decide whether to accept a short sale? 

We'll put together a submission package including W-2 forms from employers (or a letter explaining the seller is unemployed), bank statements, two years of tax returns, and other financial documents outlining income and debt obligations. The bank will also need comps or a broker’s price opinion showing your estimate of value.

In addition, you'll submit a “hardship letter,” explaining the circumstances that make it impossible for them to pay the full amount of the loan. The seller needs to be able to show true financial hardship. Someone with the assets or the income to pay is unlikely to be considered, say most interviewees.

What are the options besides a short sale?

Thanks to programs such as those proposed by Fannie Mae and Freddie Mac to assist subprime borrowers, many lenders are more willing to offer loan modification options. This option can extend the term of the loan, add on delinquent payments to the loan principal, and/or reduce the interest rate to make the loan more manageable for the home owner.

Another option is a repayment plan that requires home owners to increase their monthly payments until the loan is current,  It may be possible to refinance an adjustable rate loan with a Federal Housing Authority or conventional fixed loan. Note that lenders will not postpone a foreclosure just because a property is listed, although they may postpone if you have a reasonable offer in the works.

Tip: The ideal candidate for a short sale is still making loan payments and has a credit rating worth preserving. Otherwise, it may not be worth going through the complicated process, says Steve Pierce, broker and operating principal of Keller Williams Benchmark Properties, Fremont, Calif.


How long does it take to complete a short sale?

Although response times vary from lender to lender, it can take two weeks or as long as 60 days to receive an approval of a short sale from a lender. That’s why it’s critical that buyers and their representative understand and accept that time frame before they make an offer.

What can the seller and I do to make a short sale more attractive to a lender?

Getting a lender to approve a short sale is primarily a question of economics. You have to provide hard numbers to show that the amount of money a bank will realize on the short sale is better than the amount it may recoup from foreclosing on the property and selling the property.

A 2002 study by Craig Focardi of the Tower Group estimated that the entire cost of a foreclosure was $58,759 and took 18 months. Other factors that can influence a bank’s decision include the liability risk it assumes by owning the property after foreclosures, the money tied up during the holding period for a foreclosure and REO resale, additional costs associated with an REO such as attorneys’ fees, and the additional reserves it will need if REOs rise in the bank’s portfolio.

What are the seller’s options if a short sale is rejected by the lender?

There are a variety of reasons a bank will reject a short sale — from too low a price to too many files on the loss mitigator’s desk. We can look for another buyer or even try resubmitting the same contract. "Banks don’t want to take properties back in foreclosure, so they are going to do everything they can to make it work," says Pierce. You also need to prepare your seller in advance for the possibility of foreclosure if a short sale fails, says Parmelly.

Tip: A short sale might be rejected if the loan is less than a year old. In such cases, the servicer that’s bought the loan can often require the original lender to buy it back, says Hollingsworth.

Published June 2007, REALTOR® Magazine Online