Many people today are finding themselves in a situation where they can no longer afford their monthly mortgage payments. Maybe your mortgage payment increased because you had an Adjustable Rate Mortgage (ARM) and it ballooned? Maybe you found yourself caught in the subprime mortgage crisis? Maybe you've lost your job or your company downsized, you've taken a pay cut? Maybe you have gotten divorced? Maybe you've been injured and are out of work?
So many people today are experiencing financial struggles and cannot see a way out. You are NOT alone.
You DO have options and I can try to help you! On this page I hope to provide you with a wealth of information and helpful websites that will explain some of your options. Please contact me to discuss your situation. Together we can work towards a resolution.
What is a Short Sale (in plain English please)?
A short sale is when a lender (mortgagee) agrees to allow the borrower (mortgagor) to sell their home for less than what they owe on the mortgage rather than foreclose. A Short Sale is NOT a simple process. It is time consuming and takes a great deal of patience from all parties involved.
The mortgagor will be asked to provide the lender with data to support their claim as to why they can no longer afford their mortgage. Typically the lender asks for 2 years tax returns, 2 most recent paystubs, last 2 bank statements, a Hardship Letter (a letter to each lender explaining your situation), a list of your monthly expenses and a letter of authorization allowing a 3rd party to negotiate on your behalf, usually your real estate agent or real estate attorney. I strongly recommend that you enlist an experienced professional to negotiate the short sale.
The process usually begins with placing your property on the market and listing it at Fair Market Value. You may owe 300,000 but if the property is only worth 250,000 -- that is all a buyer is going to pay, that is all it is going to appraise for and that is all the buyer's lender is going to give them for a loan. This is a short sale.
You must be upfront with your agent. Disclose everything that you owe including first and second mortgages or liens, any home equity lines of credit (HELOC), real estate taxes due, home owners association fees due, special assessments, past due utility bills, etc. All of these items will need to be paid either in full or in part by the sale. Your agent will have to negotiate with all parties involved and get them all into agreement to get the short sale to the table and close the transaction. Many times this is a long process but can be well worth the wait to avoid foreclosure.
The buyer must also be patient throughout this process. It can take months for the lender(s) to give the agent a response to their offer. Many lenders will only accept one offer at a time. Once the home seller normally accepts an offer from a buyer, it is submitted it to the bank for 3rd party approval (meaning all lenders involved must approve the offer; just because the seller accepted the potential buyer's offer does not mean the lenders will).
This leaves the property as under contract with the contingency of 3rd party approval. The property can still be marketed to the public but typically any offer submitted while the lender is reviewing the initial offer, would only be a back up offer to the first should any party terminate the initial offer.
The home seller may be asked to sign a Promissory Note for all or a portion of the shortage as part of the agreement to short sale the property. Almost all lien holders will take a loss on the short sale. Many times the real estate agent is asked to reduce their commission in order to close a short sale, so there is also risk involved for the agent that takes on the challenge of a short sale transaction.
For More Information on Short Sales Click Here.