Short Sales - Sellers Edition

Determining if you qualify:
Many Sellers are under the false impression that just because they are underwater on their mortgage they can do a short sale.. That is simply NOT true. If you made a bad investment and have the means to cover the loses, the bank will expect you to either keep making payments as prescribed in your mortgage, or cover the losses of the sale through your other assets. Do not expect the bank to take losses while you walk with assets...including IRA, 401K, other properties or tangible assets. You MUST be effectively insolvent to get a bank to agree to a short sale.

How to get started:
Find a Realtor knowledgeable in short sales and have them help you pull together a short sale package. The package will differ from institution to institution.
1) You will need to send a written request and authorization for your Agent/Broker to discuss the loan(s) with the Servicer.
2) You will need to provide a complete accounting of your finances (Income, assets and liabilities) and a letter of hardship detailing why you feel a short sale is appropriate.
3) Your Broker will need to do a BPO.

What will the short mean for you:
1) You will be able to stay in the home during the process.
2) The bank may accept smaller payments during the marketing time.
3) You may be able to negotiate the limitation of derogatory comments on your credit report.
4) Sellers cannot get ANY cash from the proceeds.


What can trip you up:
1) Some Lenders will compare your original loan application to what you claim on your financial disclosure package. If there are discrepancies, they may go after you for loan fraud (Say you did a stated income loan, claiming a $150,000 a year income, but you provide your pay stubs and only show $100,000 in income).
2) The second mortgage. Don't forget about the second or HELOC.
3) Other recorded liens against the property that could encumber the transaction.
4) Buyer patience. The process can take months. Be sure your Buyer has the time and patience to wait it out.

Short sales can be very complex and there is no one formula, as each transaction is its own animal. Do not attempt to do it on your own. You cannot get paid on it anyway, so bring in an experienced Realtor to guide you through. The Bank will pay their commission out of the sale proceeds.