#real estate short sale
How To Do a Short Sale
By Elizabeth Weintraub. Home Buying/Selling Expert
Elizabeth Weintraub has an extensive background in real estate spanning more than 30 years, including experience in related industries such as title and escrow. She is a full-time broker-associate at Lyon Real Estate’s midtown Sacramento office and is recognized as a top producer. She is also a Life Member of the Master’s Club, an honor bestowed by the Sacramento Board of REALTORS , and ranks in the top 1% of all the agents at Lyon Real Estate.
CA BRE License #00697006
A short sale in real estate is not always a pleasant transaction, but short sales have come a long way since 2006, so don t sell the concept short.
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One of those options is called a short sale.
More than half of my sales in Sacramento since 2006 to 2012 have been short sales. That s how prominent short sales have become. In recent years, even sellers who are not delinquent might qualify for a short sale, which has opened many more short sale doors.
When lenders agree to do a short sale in real estate. it means the lender is accepting less than the total amount due. Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose; moreover, not all sellers nor all properties qualify for short sales .
As a real estate agent, I am not licensed as a lawyer nor a CPA and cannot advise on those consequences. Except for certain conditions pursuant to the Mortgage Forgiveness Debt Relief Act of 2007. be aware the I.R.S. could consider debt forgiveness as 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.
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In some states, this amount is known as a deficiency. A lawyer can determine whether your loan qualifies for a deficiency judgment or claim.
Most short sales in California carry no tax penalties anymore.
Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect.
You may need to make a half dozen phone 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, the name of the individual capable of making a decision.
Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan. The letter should include the following:
- Property Address
- Loan Reference Number
- Your Name
- The Date
- Your Agent s Name Contact Information
This is an estimated closing statement (HUD) that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions. if any. Your closing agent or lawyer should be able to prepare this for you, if you do not know how to calculate any of these fees. If the bottom line shows cash to the seller, you will probably not need a short sale.
The sadder, the better. This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized or a truck ran over your entire family, but lenders are not particularly empathetic to situations involving dishonesty or criminal behavior.
It is best to be truthful and honest about your financial situation and disclose assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.
If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it s probably a good idea to explain each of those line items to the lender. In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.
Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a comparative market analysis (CMA). Your real estate agent can prepare a CMA for you, which will show prices of similar homes:
When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to pay for certain items such as home protection plans or termite inspections.
Now, if everything goes well, the lender will approve your short sale. As part of the negotiation, you might ask that the lender not report adverse credit to the credit reporting agencies. but realize that the lender is under no obligation to accommodate this request. Credit report status is not always negotiable.
Read more about Before you Buy a Short Sale .
Click Here For Page Two About Short Sales
At the time of writing, Elizabeth Weintraub, BRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.