Short Sales: Rescuing homeowners from financial catastrophe
There has been a surge in the number of foreclosures throughout Charlotte and the surrounding areas and this dilemma not only affects modest, starter based homes, but homes in the million dollar price ranges as well. Homeowners and neighborhoods are suffering. The downward cycle of foreclosures and falling prices can eventually feed on itself, continually building momentum until everyone feels the effects. However, there is help available to remedy the situation and many mortgage companies, community-based programs and real estate professionals are actively working together to help alleviate foreclosures. A short sale might be the answer.
A short sale is a sale of a property in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what they owe.
Many homeowners seeking relief often times do not understand the benefits and tradeoffs of undergoing the short sale process. This is especially due to the fact that there are as many different types of short sale qualification processes and guidelines as there are banks. These guidelines depend upon a number of factors such as the type of the loan undergoing the short sale approval process, the loan’s servicer (who monitors and collects the loan payments on behalf of the mortgage company/investor), the organization/program financially backing the loan, the specific mortgagor’s pre-foreclosure/short sale requirements and the length of time the loan has been in default.
Throw in misinformation spreading rampantly, scam artists targeting those homeowners in default, and some mortgage companies unwilling or uncooperatively discouraging homeowners to just give up and turn in the keys…. It’s no wonder homeowners become so frustrated and decide to give up. Don’t give up. Get educated on the basic steps you must take to avoid foreclosure and contact us so we can intervene on your behalf, advise you of your options and apply our experience and due diligence in dealing directly with your mortgage company and avoid foreclosure all together.
There are several reasons to consider a short sale:
- The homeowner has suffered a financial hardship which does not appear will get better within the next six months to a year.
- The homeowner or their spouse/partner has suffered a medical condition that prohibits him/her from working or obtaining financial support to save their home.
- The homeowner has agreed to sell their home to avoid foreclosure, but cannot make the necessary repairs to bring the home up to par to command a price equal to or greater than what is currently owed on their mortgage balance.
- The homeowner became over-extended financially and as a result, is in a financial bind that prohibits them to continue to make payments on their home. For example, this may be a result of a job layoff, divorce, job termination, or overall increase in everyday living expenses.
- The homeowner has suffered an extenuating family situation that resulted in the family’s overall budget to decrease significantly. For example, a spouse may have become extremely ill and unable to work, a divorce or separation has gone into effect, or one of the mortgage borrowers has become incarcerated.
- The homeowner is currently 30 days or more behind on their mortgage payments and the collection process has begun. The homeowner wants to avoid a foreclosure and save their credit.
- The homeowner has been in collections status for some time and in fact, time and their options are running out in saving their home. The homeowner thought he/she would be able to overcome foreclosure by “catching up” on payments, but things have unfortunately turned for the worst.
If any of these reasons fit your circumstances then foreclosure may be imminent. Contact your mortgage company for current options to help you save your home or contact us to help assist you with this cumbersome process.
Here is how the process works:
We will need to make the lender aware of your financial hardship. However they will require a letter of authorization for us to negotiate on your behalf.
What to include in the letter of authorization:
- A short letter authorizing us to negotiate on your behalf
- Loan reference or account numbers
- The date
- Property address
- Owner’s full name and signatures
- Owner’s contact information
- Agent’s name and contact information
Once we’ve contacted the lender and are authorized to have a conversation, we’ll begin to negotiate with someone in their loss mitigation department. The lender will usually not consider approving a short sale until there is a legitimate offer but the loss mitigation officer will supply us with a short sale packet to get us closer to avoiding foreclosure.
A typical short sale packet includes the following:
- Cover letter with everyone’s contact info: If foreclosure is imminent, put that in the cover letter. If an offer is made include a summary of the offer in the cover letter.
- Hardship Letter: Letter from owner documenting the financial facts that led to the short sale request.
- Proof of hardship: Job termination letter, medical bills, death certificates, divorce decrees, etc to support your assertion that the bank should take less.
- Proof of income and assets: Bank statements, last two pay stubs or if self employed, last 6 months of profit and loss statements, bank statements, last two years of tax returns.
- Disclose and document all assets: Investments accounts (401k, IRA, etc.), Stocks, Certificates of Deposits, any interest in other real property or businesses, etc.
- Information on other liens on the property (HOA, construction liens)
- Documentation of any and all damage to the property
- Preliminary net sheet: Reflect the sales price you expect to get and any other fees that will be due on sale, including commissions.
Comparative Market Analysis with analysis of current actives, pendings, and solds.
If an offer is made also include:
- Listing Agreement with all signatures
- Complete offer to purchase contract with all signatures
- HUD 1 and Seller’s Net Sheet
- Proof of funds for Cash Offers or Pre-Approval letter for financed deals
Arrange the documents so that they are in order as in the cover letter. Most REO agents will only deal with originals and in this case, I would try to do the same. Illegible faxes only slow down the process. Remember lenders can have a heart, and this may be a lengthy bureaucratic process, but we are committed to help homeowners through it. If you or someone you know is facing foreclosure, get help fast.
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