What is a Short Sale?
A short sale definition can be easily found these days as more homeowners try to avoid foreclosure. But what exactly is a short sale? When would anyone need a short sale, and why would they even consider it?
Basically, a short sale is a program that allows a homeowner to sell their house for less than what is owed on the mortgage. A short sale is designed to help people avoid the stress and embarrassment of foreclosure. A short sale can help homeowners avoid further collection activity which could result in adverse credit reporting and possible tax liabilities.
In the past, it was rare for a bank or lender to accept a short sale. Today, however, due to overwhelming market changes, banks and lenders have become much more negotiable when it comes to these transactions.
Why would anyone consider a short sale?
There are many different reasons. Perhaps the homeowner lost his or her job, or suffered an illness or injury that prevented them from working. Perhaps their salary had been drastically cut and they suddenly found themselves struggling to pay the bills. In any case, it generally begins with the homeowner coming to the realization that they can no longer afford their monthly mortgage payments, coupled with the fact that the current real estate market will force them to sell the home at a value below what they owe on it. This is the situation that is generally explained as sellers being “upside down” on their mortgage.
Here’s a more technical definition:
A homeowner is ‘short’ when the amount owed on the property is higher than current market value.
A short sale occurs when a negotiation is entered into with the homeowner’s mortgage company to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then ‘sold short’ of the total value of the mortgage.
Also, it is important to note that short sales are what is known as “arms-length” transactions, meaning that the property may not be sold to anyone with whom the seller has a close personal or business relationship, including friends, family and neighbors.
For homeowners to qualify for a short sale, they must fall into all of the following circumstances:
- Financial Hardship – There is a situation causing you to have trouble affording your mortgage.
- Monthly Income Shortfall – In other words: “You have more month than money.” A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
- Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.
This seems simple enough, but it is a complicated process that takes the expertise of experienced professionals. As agents with the CDPE Designation (Certified Distressed Property Expert® ), we are confident in our ability to assist you as you navigate the process of loan modification, short sale or whatever might be the best solution for you.
Short Sale Process
The short sale process begins much the same way as any other property sale; that is, the property is listed for sale on the real estate market, and it is shown to potential buyers.
The seller will submit to the lender their short sale request. This begins with a letter of hardship in which the seller must outline in detail and in their own words the reasons for their inability to meet financial obligations. This letter is an important part of the short sale, and the seller should be as persuasive as possible in describing why they are no longer in a position to pay their mortgage. Honesty and frankness count as the letter could make or break the short sale.
In addition to the hardship letter the homeowner will need to supply the lender with further documents. Each lender is different and their requirements may vary, but in general they will request such paperwork as current financial statements, tax returns, an accounting of assets and liabilities, pay stubs, insurance information, mortgage statements, authorization forms, and other papers that might be relevant, such as divorce decree, bankruptcy documents, and power of attorney forms.
Once the lender agrees to the short sale, the seller must wait for an offer on the property. Once an offer is received and accepted by the seller, it then must be presented to the lender. This process usually takes from three to four months or more. During that time, the property is officially in contract and cannot be sold to another buyer.
Short sales are not for the faint of heart. They are demanding transactions that require patience and fortitude from the seller. In the end, however, short sales are worth the time and effort if they result in the avoidance of a foreclosure action.
Knowledge is power in the short sale process
Unfortunately too many homeowners facing foreclosure proceed without guidance of any kind through the often financially and emotionally devastating prospect of foreclosure. Now more than ever you need to find an advocate for you and your family’s interests. Through comprehensive training and experience, we have the tools to help homeowners find the best solutions for their unique situations and to avoid foreclosure through the efficient execution of a short sale.
If you find yourself, a family member or someone you care behind in mortgage payments or headed into those waters, I strongly encourage you to sit down with us and become educated on options available to you to avoid foreclosure. Understand that you are not alone. Unlike most other agents, my team actually handle the real estate function and bank function together as one.
Living through financial difficulties poses a challenge for any family, so why make the process of finding a qualified real estate professional difficult too?
Select an agent with the CDPE Designation to ensure you have a trained professional to address your specific needs. A Certified Distressed Property Expert® (CDPE) has a thorough understanding of complex issues in today’s turbulent real estate industry and knowledge of foreclosure avoidance options available to homeowners. There is absolutely no cost to you to meet with us and become more informed about the options available to you. There are tax, legal and credit issues. In some cases, planning takes time. And knowing your options in advance gives all of us the upper hand. Our services are free from beginning to end. The bank pays our commissions.
We are among the most successful team of agents in the Metro area when it comes to counseling distressed homeowners. 98% of our clients have avoided foreclosure successfully through a short sale.
Don’t risk your financial future and the potential sale of your home.
We realize that this is a difficult time for most people. Please know that we are here to help.
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What is a CDPE?
When your roofing needs to be replaced, you consult a roofing expert. When there’s a problem with your computer, you consult a technician who understands the issues of your particular model. And when a loved one becomes sick, you seek answers from medical professionals specifically trained in that particular illness. Similarly, in this current economic crisis, millions of homeowners facing financial hardship and possible foreclosure action are requesting the help of agents with the Certified Distressed Property Expert® (CDPE) designation. A CDPE is a real estate professional with specific understanding of the complex issues that confront homeowners in distress. Through comprehensive training and market experience, CDPEs are able to provide real solutions for homeowners facing hardships in today’s market.
The prospect of foreclosure can be financially and emotionally devastating, and often homeowners proceed without guidance of any kind. CDPEs believe that in almost all cases, the best course of action for a homeowner in distress is to speak with a well-informed, licensed real estate professional. They have the tools necessary to help homeowners find the best solution for their particular situation. While enduring financial difficulties are challenging for any family, the process of finding a qualified real estate professional should not be. Andrea Frank has achieved the CDPE designation, ensuring you deal with a professional trained to address your specific needs. CDPEs don’t merely assist in selling properties, they serve and help save their clients in need.
Important notice: Ascent Real Estate,Inc is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use this service, your lender may not agree to change your loan. If you stop paying your mortgage, you can lose your home and damage your credit rating