Welcome to the Short Sale information center for California Homeowners Upside Down on their Mortgage or in Default.
SHORT SALES QUESTIONS AND ANSWERS
What is a Short Sale?
A short sale is when a lender/bank agrees to accept a discounted payoff on the balance owed if your loan is more than what the house is worth.
What are the benefits of doing a short sale?
A foreclosure will do more damage on your credit report than a short sale will. Some banks may not even report a short sale in some cases. In the event of a foreclosure, there have been some cases that the lender will come back and seek a deficiency judgement in the amount you owe.
Can I get moving expenses from a short sale?
You must be living in the house and be your primary residence to qualify for a HAFA - Home Affordable Foreclosure Alternatives. Qualified homeowners can get anywhere from $3,000 to $7,000 back from the bank for moving expenses.
How can working with a Short Sale expert benefit me?
We work diligently with your mortgage lender in negotiating a lower payoff. We work on marketing your home on major search engines and work hard to get your home sold. Call us to see what type of program fits your needs (619) 356-0690 and ask for a short sale specialist.
Can I sell even if I have a Notice of Trustee Sale?
Yes, in fact we will help get the Trustee Sale date extended, in some cases they will stop the Trustee Sale date once we have an offer your home, so hiring a Short Sale expert as soon as possible is beneficial to you.
Negotiating The Short Sale
Negotiation through the loss mitigation department will be the key factor in getting your new home at a deep discount.
If opportunities emerge in which lenders can sell distressed properties without registering big losses, they will do it.
For example, consider that a homeowner with a $200,000 mortgage is late on his or her loan payments and is facing foreclosure. With the consent of the homeowner, you offer his or her lender $150,000 as full payment for the loan, which is accepted. That means you instantly save $50,000 on a real estate investment.
What is a BPO or Broker’s Price Opinion?
Lenders generally hire local real estate brokers or appraisers to evaluate properties in the foreclosure process prior to selling them at public auction. These are referred to as a Broker’s Price Opinion (BPO).
Essentially, a Realtor® — based on the condition of the home and current market conditions — provides the lender with an estimate for the value of the property. The BPO is the key piece of information that a lender will rely on to make a decision regarding a short sale.
Lenders want to get rid of distressed properties as soon as possible, but they aren’t going to sell them for ridiculously low prices. Many short sales, in fact, fall through if the BPOs come in too high. When properties are in good condition, it is hard to convince lenders that they are worth much less than the appraised values.
What is a Hardship Letter?
Most lenders will request a hardship letter that details the reasons a homeowner has not made his or her mortgage payments. This is a bit strange because the borrower who is in default must prove that he or she is financially not able to afford the payments.
This is a fairly extensive request, which may require the homeowner to submit pay stubs, tax records and other personal financial records, along with the letter. It is essential that you submit everything that is requested.
Otherwise, your offer will not be accepted.
Creating an effective and compelling hardship letter requires creativity. Without lying, the letter should paint a very bleak picture of the situation. If neither you nor the homeowner possesses decent writing skills, it may be in your collective best interests to seek the assistance of a professional — it’s worth it.
A lender will generally require a written contract between you and the homeowner. A preliminary HUD-1 settlement statement will reassure the lender that the homeowner isn’t receiving any cash from the deal.
The HUD-1 form requires you to itemize all charges imposed upon you and the homeowner for the real estate transaction. Essentially, it is a complete list of the incoming and outgoing funds.
The contract should be written so that you pay all costs associated with the deal. And, that the “net cash” to the homeowner is the precise amount of the short pay to the lender.
Your Realtor will have a title or escrow company prepare it to have figures of their costs included.
What documents will I need to qualify?
- Last 2 years taxes
- Last 2-3 months check stubs, from employment, social security, disability, etc. If self employed we'll need profit and loss statements.
- Hardship Letter
- Last 3 months bank statements. Checking and savings.
How long will it take for a response?
It usually takes about two to four weeks to receive an answer from the lender (depending on who the lender is) once you have submitted the HUD-1 settlement statement and all of the other supporting materials.
It’s always good to call the lender to ensure that he or she has received the information, as well as make it clear that you are always available to answer questions and provide additional information, especially if something is missing.
If the auction date for the property is approaching, I will work with the bank to get the sale date extended until he or she has had time to consider your offer. If your offer is legitimate, the lender will almost always grant your request.