What is a short sale (formerly known as short pay resolution)?
A Short Sale is the sale of a property for less than what the borrower owes to the bank. In this type of sale, the lender will accept less than the face value of the note, and, in many cases, forgive the remaining debt. Many lenders would much rather accept a short sale than foreclose on the property and incur the costs associated with foreclosure. Foreclosure is a time consuming and costly process that banks and lending institutions would prefer to avoid.
Realtors® who take “short sale” listings should proceed with caution. These are time intensive and frustrating transactions, if not processed and negotiated correctly. If you are a Realtor® who has a short sale listing and are unsure of how to proceed, contact our office today!
When is the best time to take a short sale listing?
It is best to begin the short sale process as soon as possible. Since a foreclosure usually takes approximately 7 months to complete from the date of the first missed mortgage payment, it is best to try and list the property once a borrower cannot afford to make the payments any longer. This gives the agent a minimum of 7 months in order to complete the short sale transaction.
Why do lenders allow short sales?
It’s simple really. Often a short sale has a far better return on an investment to the lender than a foreclosure. The average savings a lender sees from a short sale property is far higher than the savings of a foreclosed property. Not only does the lender receive higher savings when they allow a short sale, they also get paid on the loan 6 months earlier than in the foreclosure process. This allows them to collect and cash-out earlier than they would if they foreclosed on the property. In addition, in a foreclosure, the lender will have to pay their attorneys to complete the process. Lenders created the short sale process as an alternative to foreclosure for those reasons. It is a win-win situation for the banks to allow short sales. They do not look at this as helping a borrower; they look at it as a positive solution to a very costly and time consuming process.
How long does the short sale process usually take?
The entire process of a short sale generally takes 30 to 90 days (1 to 3 months). All situations are unique, and each lender has its own policies and processing times. Therefore, we cannot guarantee a specific time frame for the processing of a short sale.
How do short sales impact a borrower’s credit?
A foreclosure will show as a foreclosure or a debt NOT PAID. It is a very negative mark on your credit that can stay there for up to seven years! A short sale will show either a debt paid or a debt settled. It is a much better mark and will make it easier for borrowers to get credit in the near future. Consult with one of the three major creditors, HUD (call 888-995-HOPE), an attorney, or an accountant for more information.
What are the borrower’s liabilities when doing a Short Sale?
On December 20, 2007, President Bush signed a measure to provide financial relief for financially strapped homeowners facing foreclosure. The bill gives a tax break to homeowners who have mortgage debt forgiven as part of a foreclosure or renegotiation of a loan. NO TAXES WOULD BE OWED ON THE VALUE OF ANY DEBT FOREGIVEN OR WRITTEN OFF. Before that, such debt forgiveness is taxable income. Consult your local CPA for further information on this matter and to learn whether your specific situation would qualify under this bill.
It is important to note that if a property should go into foreclosure and is sold at auction the difference in the amount you owe on your loan and the price the lender will get on a foreclosure sale is much higher than the discount they will give at a short sale. Completing a successful short sale may eliminate a deficiency judgment and minimize the tax liability you may have. It can also stop you from having a foreclosure ‘mark’ on your credit.
If I am taking a short sale listing, what special things do I need to do?
In addition to the standard documentation required when you list a property for sale, there are specific forms that you will need, and that should be collected from the borrower at the time the listing is taken. These items will need to be submitted to the bank in order to process and negotiate the short sale transaction. Visit the Member’s Resource Page to download a list of the necessary documents required to complete the short sale package.
Why hire Short Sale Expeditor®?
Our knowledgeable staff consists of expert short sale processors and negotiators and, as such, we are a viable solution. We are here for you with answers. We want you to feel confident that you are making the right decision for your client’s specific situation. We work with all our clients and offer confidentiality, integrity, and attention to detail. Short Sale Expeditor® has closed hundreds of short sale transactions. We obtain approvals on 95% of our transactions. It can be a time consuming and stressful process, but we know what it takes to get the job done right! You will feel confident taking short sale listings with our company by your side.
Does a borrower need to sign a Power of Attorney when processing a short sale?
NO! At no time should a borrower sign a power of attorney to process a short sale.
Can you negotiate a short sale when a home has more than one mortgage?
Yes. The process is the same regardless of the number of liens.
Can you guarantee that my short sale will be successful?
We can guarantee that we will do all that is required to complete a successful short sale. Unfortunately, we cannot guarantee that the lending institution will approve the short sale. At Short Sale Expeditor®, we know what the lenders require and are looking for as a discounted price. This makes our success level much higher.