What is a Short Sale?  A Short Sale is when a borrower owes more on the property than the property is worth.  The borrower's Realtor negotiations with the lender to accept less than what is owed on the property to satisfy the note and release the lien.
 
Is a Short Sale my best option?  Possibly. Consider the fact that lenders DO NOT want to own your home! The Lender is increasingly more willing to work with homeowners faced with "legitimate" financial hardship.  Remember if you have a "legitimate" hardship that makes it likely you are now or soon will be in default of your mortgage, the lender may be willing to work with you on a short sale.  In order for your lender to approve a short sale, the lender must weight whether it makes more sense for them to do a short sale over a foreclosure.  The lender(s) have a formula that they use to determine whether to foreclose or approve a short sale.

What will it cost me to sell my home as a Short Sale?  Nothing. All closing cost including: commissions, title insurance and all liens are paid for by the lender at closing.  In some cases the lender may even pay for some repair expenses. We use the following wording in the MLS: "The sale of this property is subject to third party approval.  In the event that the lender reduces the Realtor commission, then we will split the commission 50% to 50% less any MLS fees."  Remember that a short sale to be approved by a lender must provide the lender with an advantage in either more money or less cost to hold the property than a foreclosure..

What do I need to do if I want to sell my home as a Short Sale?  First, contact a Realtor that is a highly trained short sale specialist. You should consult your attorney and CPA to determine the impact a short sale might have on you.  A Realtor can see if you qualify for a short sale.  Once this is done, then you should list with the Realtor and get the paperwork ready to be submitted to the lender. 

One of the forms that you will sign is an authorization for the  lender to discuss you loan with your Realtor.  This allows the Realtor to negotiate for you.  Other paperwork that is required are:  A Hardship Letter, Financial Worksheet, Last 2 years of your tax returns, last 2 months bank statements and your last 2 paystubs. You must have a legitimate hardship for the lender to approve a short sale.

Below you will find a list of the most common “hardships” that are frequently accepted by mortgage lenders:

• Loss of Employment or Significant Loss of Income

• Disability

• Divorce or separation of domestic partners

• Death of a spouse

• Family illness or injury

• Illness or injury within the extended family

• Military

• Employment relocation, but if there's no or not enough equity in the property

• Transfer or relocation

• Increase in mortgage payment(s), insurance or other unexpected increases in living expenses

My mortgage payment(s) are current, will my lender consider a Short Sale?  The answer is, maybe. I would say that your chances are less than 10% that they will consider a short sale.  If you are still able to make your payments, then your hardship must not be so bay. 

How long will it take to get my property on the market and sold?  This greatly depends on the Realtor that you choose and the marketing that the Realtor does.  Remember that pricing is the most important thing in getting an offer and getting short sale approval.

Suggestions on Pricing: If you price the property at 10% below the current market value of similar properties not in a distressed situation, then that should be your starting point.  After about 21 days, you should reduce the property by 3-5% and wait another 14-21 days and do another price adjustment of 3-5%.  Once you start to get offers, stop the price adjustments and watch the offers come in.  This type of pricing will give the lender a history of marketing by your Realtor showing that you tried at a much higher price and reduced to a point where offers and the market told you where you should be.

Why would any Lender agree to a Short Sale?  They can get a non performing property off their books in the fastest way and they can get their money in 24 hours after the closing.  They have no holding cost and never have to go thru the expense of a foreclosure.

Legal Issues – Lenders have come under increasing legal pressure to work with borrowers to equitably resolve situations where borrowers are unable to meet their mortgage obligation, particularly when the borrower makes an effort to arrive at a compromised solution.

Your Loan – Your lender will normally package and sell loans on the secondary mortgage market (Wall Street). By selling these bundles of loans, they raise funds, which they in turn put back to work in the form of new loans. When a  mortgage becomes a non-performing loan, after they have sold, it could impact the lender's ability to sell other loans on the secondary market. A successful Short Sale gets the loan payoff resolved quickly and with the least amount of cost to the lender.

Servicing Companies - When a lender acquires a property through foreclosure, the property will be managed until it is repaired and resold. This is an expense the the lender would rather not have.  When they are keeping the properties maintained, paying for utilities, making repairs and they have other carrying costs.  By doing a successful Short Sale, this  eliminates most of these costs.

Non Performing Loans - When a loan is delinquent, it becomes a non-performing loan and this will place a huge burden on mortgage lenders. When a loan is considered delinquent and non-performing, the lender must set aside enough reserve funds to deal with potential losses. Keep in mind, that these funds cannot used for new loans until the bad loans are resolved.  When they do a Short Sale the lender can put this reserve money back to work.

Do Lenders approve all short sales?  NO! The best way to make sure to get your short sale approved, and there are no guarantees, is to hire the a experienced and trained Realtor that is a short sale specialist. With the national average currently at only 17%, the Realtor that you choose will greatly increase your chances to 80-85%.

What about multi loans, can I still do a short sale?  Yes. The process will take a little longer, but working with an experienced Realtor will make this a lot easier for you and less stressful for you.

If my property needs repairs, can I still do a short sale?  Yes! Some lenders even ask the appraiser or agent doing the BPO (Broker Price Opinion) to let them know the condition of the property.  If there are a lot of needed repairs, the lender will take this into consideration when deciding on a short sale or a foreclosure.

How will a Short Sale affect my credit?  Lets take a look at what a foreclosure will do to your credit.  Normally a foreclosure will hit your credit for between 250-300 points.  a Deed in Lieu of Foreclosure will hit your credit about the same as a foreclosure.  A short sale will hit your credit normally between 70-120 points.  A recent survey of 400,000 people who did a short sale showed that if the credit score was 800 or better before the first missed payment, the hit on the credit was between 130-170  If it was 720 then the hit was 70-120 and if the credit score was 640 then the hit was 30-50 points and if your credit score was 550, you actually could increase your credit from 0-20 points.

How long to repair my credit? Current FHA guidelines says you can buy a house in as little as 2 years with a deed in lieu of foreclosure, it is 4 years and a foreclosure it is 7 years.  Your credit should start to go up almost immediately as long as you keep all your other bills in good condition.  There are companies that work on credit repair and you could get your credit back in as little as 12-18 months.  Remember that you are reducing a large amount of debt that shows on your credit. 

Can I do a short sale if my hardship is only temporary? Maybe. You may find that if the hardship is only temporary and you can return to the ability to pay your mortgage, the lender may want you to continue.  You will need to give your Realtor all the details.  If something happened like illness or disability or if you have to take a reduction in pay to keep you job is a hardship, but if you have a temporary layoff and you return to work, unless you can show that the time off from work has gotten you into a position where your may not be able to catch up, then a short sale is still possible.  Each situation is different and this is where an experienced Realtor can be invaluable. 

What Can I do to Help You?  I have been trained by one of the Top Short Sale Realtors in the Country.  I have his entire team to assist me and you during your short sale listing with me.  You will be able to email him and get a quick response to any question that you might have.  Dick Sells, better know as Dr Short Sale, is on my short sale team during the entire process.  Any situation that might come up can and will be handled to the highest level of professionalism.  Since the lenders as aware of Dick Sells and his staff, they offer advice as how to handle any short sale situation.  Not only are you getting me, personally trained by Dr Short Sale, but you get the entire Dr Short Sale team to assist in the process.

Remember it cost you nothing to get the best working for you.  Dick Sells is an active Realtor in Tampa Bay Florida and his closure rate is better than 95%.  And the best part is that you get him for FREE. 

Increase your chance of a successful short sale and know that you have hired the best.