SHORT SALE
Presented by: Josefina M. Serrano
Mission College: RLEST091
Instructor: Mr. Frank Diaz
What is a Short Sale?
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A Short Sale is a proceeding where the
mortgage borrower can no longer afford the
monthly payment on the mortgage and decided
to sell the property for less than the appraised
value thereby avoiding a foreclosure.
Providing the seller’s lender(s) is accepting a
discounted payoff to release an existing
mortgage
Things to consider in a Short Sale
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When lenders agree to do a Short Sale in
Real Estate, it means the lender is willing to
accept less than the total amount due,
however not all lenders will accept short
sales or discounted payoffs, especially if it
would make more financial sense to
foreclose.
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Be aware that the seller will need to be in default,
to have stopped making mortgage payments,
before a lender will consider a short sale.
The seller might have over-encumbered, owe more
than the home is worth, so a discounted price
might bring the price in line with market value.
As a Real Estate Agent we must always remember
that we cannot give legal or tax advise.
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An appropriate statements: “as a Real Estate
agent, I am not licensed as a lawyer nor a CPA and
cannot advise on those consequences.
Be aware that the IRS will consider debt
forgiveness as a taxable income, and there is no
guarantee that a lender who accepts a short sale
will not legally pursue a borrower for the
difference between the amount owed and the
amount paid.
In some states, this amount is known as a
deficiency. A lawyer can determine whether your
loan qualifies for a deficiency judgment or claim”.
Step by Step Handling a SHORT SALE
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Determine whether your clients can qualify for a Short Sale
Gather all mortgage statements
Write a hardship letter signed by the borrower to be mailed or faxed to
the lender.
Write an authorization letter signed by the borrower to be mailed or
faxed to the lender. Lenders typically do not want to disclose personal
information without written authorization from the borrower.
Include the following on the letter:
- Property Address
- Loan Reference Number
- Borrowers Name
- Date
- Agent Name & Contact Information
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Call the lender and advise that you are representing their borrower on
a short sale. You may need to make a half dozen calls before you find
the person responsible for handling short sales. You do not want to talk
to the Real Estate short sale or work out department, you want the
supervisor’s name or the individual capable of making decision.
Ask the lenders for their requirements. Different lenders may have
varying requirements.
Step by Step Doing a SHORT SALE
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Gather all mortgage statements
Write a hardship letter signed by the borrower to be mailed or faxed to the
lender.
Call the lender and advise that you are representing their borrower on a short
sale. You do not want to talk to the Real Estate short sale or work out
department, you want the supervisor name or the individual capable of
making decision.
Ask the lenders for their requirements. Different lenders may have varying
requirements. Documents that lender will or may ask:
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Paystubs
Hardship Letter
Bank Statements
Purchase Agreements
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Tax Returns
Agent Authorization Letter
Comparative Market Analysis
Proof of Income & Assets
Once a lender approved the short sale (can be orally or in writing)
you can now list the property. Price the property at least within the
comparables. In most cases the lender will not price the property.
Make sure that you indicate on the listing that offer and commission are
subject to the lenders approval.
If you have an offer, fax them to the lender as soon as possible together with
the required documents, in a short sale time is always of the essence.
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You can continue accepting offers unless told by the lender
to stop accepting subsequent offers.
Advise the selling agents that it may take a while before a
lender will respond to an offer (very important).
When submitting an offer, it must accompany a prequalifying letter from the new buyer’s lender.
Open Escrow either by you or the selling agent.
In most cases once a lender respond, they will only give you
2 weeks to close the transaction, it is very important that
you work closely with your selling agent and that he
understands the process.
Once the buyer’s loan is completed, funded and recorded,
Escrow Company will disburse the funds accordingly.
In this case, your client (seller) do not get any of the
proceeds since the property was purchased by the new
buyer less than the amount owed.
Sample letter to be sent to the lender
December 1, 2007
OpenCountry Home Loans
1234 Somewhere Street
Simi Valley, Ca 54321
Subject Property:
1234 Showme Lane
Los Altos, California 12345
Attn: Short Sale Department:
My mortgage payments on both the 1st & the 2nd has now totaled to almost
$7,000.00 a month since the adjustment on my interest rates started. I can no
longer continue the payments financially. I have contacted a Realtor in the
neighborhood to assist me on possibly selling my house thru short sale. I
I rather do that, than go into a foreclosure.
I am asking your permission so I can proceed with the short sale. I have also
granted permission to my realtor to communicate to you in my behalf. Below
is the contact information of my realtor.
If there’s anything that I can help to expeditiously facilitate the sale, please
call me or communicate with my realtor.
Realtor Information:
Name
: Josefina M. Serrano
Company: United Capital Group
Phone
: (408) 348-2951
Fax
: (408) 281-9466
Email
: [email protected]
Sincerely,
My Beauty
Loan # 11223344
Things to Consider
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As part of the negotiation, you might ask that the lender not to report
adverse credit to the credit reporting agencies, but realize that the
lender is under no obligation to accommodate the request.
You can also ask the lender not to report the discounted amount to the
IRS. Lender will consider such a request if the borrower continue
making payments until the property is sold and funded. Again the
lender is under no obligation to do so.
Agents may take a hit on the commission. Lenders may insist on a fee
reduction, make sure that you communicate this with the selling agent.
The commission received will be the net after all expenses are paid.
Do not expect the lenders to pay for home protection insurance or any
repairs. Again, it is prudent that you communicate this to your selling
agent before they even put this on the offer.
If taxes are in arrears, most likely the lender will have this subtracted
from the net proceed thereby decreasing the commission.
Remember a short sale is a real estate transaction and it is binding
once executed, it is very wise not to assume anything from the lender,
your client and your selling agent. Always ask if in doubt.
Opportunities for the Realtors
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Since more and more homeowners are
defaulting on their loans, the opportunity to
make money in Short Sales is enormous.
Become an expert and just make money
doing Short Sales.
There are all kind of learning materials to
help you become an expert.
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Short Sale is truly a new ground floor
opportunity, not too many agents really
understand the opportunity that exist in
specializing Short Sales.
Take advantage of it and learn how to
market a Short Sale.
This is a big chance of making good money.
I hope you learned something
from my presentation.
THANK YOU 