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Short Sale

What is a short sale?
A Short Sale is an option for those who find themselves "upside down" in their mortgage. This means the market value of the home has dropped to less than the amount of the mortgage. This is a complicated solution and will require the help of a qualified short sale specialist.

Negotiation skills and experience is a must!
The Seller's agent must be a master negotiator and experienced real estate agent. He or she will work with the bank to propose a settlement where the bank will take less than what the homeowner originally owed and still consider the loan satisfied. This is a complicated transaction between the Buyer, Seller and the bank. It is very important to find a Seller's agent with the knowledge and experience to navigate through the negotiation. They must also ensure that the property is marketed with the appropriate sales price and shown to the best of it's ability. Most of all, the homeowner needs an agent they TRUST!


What are the three qualifications for a short sale?

  1. Financial Hardship - A homeowner must prove to the lender that they are in financial hardship verified through documentation. Financial hardship may be caused by mortgage payment adjustments, job loss, debt, business failure and other issues that are considered a material change in-between the day the mortgage was signed and today that has affected the ability to pay.
  2. Monthly Shortfall - The lender will need to see that a homeowner can not afford
    to continue paying the mortgage. This is done through a financial profit and loss statement. While this may seem overwhelming, an experienced agent can walk the homeowner through a financial worksheet eliminating confusion.
  3. Insolvency - The lender will also need to see that the homeowner does not have the means to pay down the mortgage. This does not mean that the homeowner must be completely broke. It simply means that the lender needs to be assured that over time the homeowner will not be able to fulfill his or her obligation. This is also done through documentation with the help of an agent.

What are the common reasons a Short Sales does not go through?
Pitfalls and Solutions:

  • Your Property Is Priced Incorrectly
    Pitfall: Your Property is Priced Incorrectly
    This is the most common mistake made with all properties, and the most common reason a property doesn’t sell.
    Solution: Agent Providing Understanding and Transparency Your real estate agent will go through a detailed listing price strategy with you, allowing you to see exactly where your property should be priced based on its current condition, sales in your area, and most importantly, how much time you have left to sell.

  • Your Short Sale Proposal Is Incomplete
    Pitfall: Your Short Sale Proposal is Incomplete
    This is one of the most frequently seen causes for the rejection of short sales proposals. Most agents do not understand the short sale process and what your lender will be looking for.
    Solution: Understand All Aspects of the Process
    Your agent should understand the short sale process in detail and be able to explain it clearly. The agent should also be able to communicate effectively with both you and lenders to produce a complete and cohesive proposal.

  • There Has Been Inadequate Follow-Up And Communication
    Pitfall: There has been Inadequate Follow-up and Communication
    As your property goes through each stage of the short sale process, an agent can jeopardize the transaction by not properly communicating with everyone involved. As the homeowner, you may not know that your file has been delayed, and that you again may run out of time to close and avoid foreclosure.
    Solution: Select an Agent With Experience
    The right agent knows exactly how to follow up to ensure that your lender’s issues are addressed in a timely manner, and will make certain you do not have unnecessary delays.

  • Not Enough Time
    Pitfall: There Isn’t Enough Time
    It is critical that your agent understands the foreclosure laws in your area. They should be able to show you an estimated timeline for the process, from start to closing. In addition, they should know how to communicate with your lender. Certain information can be provided to lenders to postpone your foreclosure for weeks or months in order to negotiate a sale.
    Solution: Provide Accurate and Useful Information
    Make sure you provide your agent accurate information as to exactly how many payments you have missed and any correspondence you have received from your lender. This will allow your agent to understand your situation and work to improve it.

  • Your Deal Is Not Submitted Properly
    Pitfall: Your Deal is Not Submitted Properly
    If you do not follow the directions you receive for submission, then you are expecting an over-worked, under-staffed department to go out of their way to handle your file. There is very little likelihood of this situation working out in your favor.
    Solution: Follow Instructions Closely
    If you are instructed to fax your file, fax it and send a backup copy in the mail. If you are instructed to mail two copies, mail two copies. When you reach the point of having a contract, all your information, and a completed proposal, you do not want your deal to fall apart because no one sees it.

  • The Buyer’s Offer Is Too Low
    Pitfall: The Buyer’s Offer is Too Low
    Many agents will encourage you to submit any offer that comes in. The reality is that a short sale is not the same as a fire sale. In order to have a legitimate chance of getting your deal approved, you must have an offer that is more attractive to the lender than a foreclosure.
    Solution: Proper Negotiation
    The right agent will work with you to properly negotiate any offer that you receive to get ‘highest and best’ from each potential buyer. This ensures you are presenting the best possible solution to your lender.

  • The Buyer’s Contract Is Not Strong Enough
    Pitfall: The Buyer’s Contract is Not Strong Enough
    Especially in our current economic climate, willingness to make an offer on a property does not mean that a buyer is truly qualified to purchase. The reality is that buyers need to be preapproved for financing, closing funds must be verified, and their ability to buy needs to be confirmed.
    Solution: An Agent Familiar with Qualifying Buyers
    Your agent should be familiar with what must be verified in order to qualify a buyer to submit an offer on your property. Otherwise, these offers may have little chance of closing. Don’t risk this process with an uneducated agent who does not appreciate this aspect of short sales.

These are all aspects that can be avoided as long as you are working with an agent who understands the process. Experience and proven track record is a must!


What are common myths about Short Sales?
Don’t let one of these dangerous myths land you and your family in foreclosure…
A short sale can be an excellent solution for homeowners who must sell and owe more on their homes than they are worth. Unfortunately, a number of myths about short sales have developed, and it is important to understand the reality of this process should you find it meets your current needs. Read the 7 most dangerous myths

 

 





Contact us today to find out if you qualify for a Short Sale.
We are here to assist you.

John Paden, REALTOR®
Cell: (757) 717-2267 • [email protected]

 

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