ihousesandiego.comShort Sale Guide

What Is A Short SaleA Short Sale is a real estate transaction where the lenders accept less than they are currently owed to release their lien.

Example: $100,000 is owed to Bank of America. $50,000 is owed to Chase on a HELOC.

What Is A Short SaleThe property is worth $80,000.

The $80,000 in proceeds from the short sale is then distributed between Bank of America and Chase. The borrower receives $0 from the transaction.

What Documents are needed?

The documents needed are similar to those provided in a “Full Documentation” loan application.

Instead of applying for a loan, you are now applying to get out of a loan.

What Documents are needed?

2 Years Tax Returns

3 Months Pay Stubs

3 Months Bank Statements

Financial Worksheet (Provided by Your Agent)

Hardship Letter & Documentation

Why Would My Lender Allow This?In the vast majority of cases, the lender receives more when they accept a short sale than they do when the foreclose and market the property on their own.

When the borrower is in the property, that borrower acts as a caretaker and keeps the property in pristine, marketable condition. This allows for the highest and best offer to obtain.

Why Would My Lender Allow This?

It is only in the lender’s best interest to foreclose when the borrower on the property has “gone dark” and is no longer cooperating or responsive. Foreclosure is a last ditch effort to recover losses.

When the borrower is still in the property, they are responsible for the taxes, utilities, landscaping, and all other incidentals that go with owning a house. The lender does not want to take on these additional costs. They are in the business of lending, not owning real estate.

Why Would My Lender Allow This?

When a property is vacant, it ages, on average four times faster than a property that is lived in as a home.

Do I Need An Agent for My Short Sale?

Yes!

Transactions with licensed real estate agents garner, on average, 14% more than For Sale By Owner transactions. After commissions, that is 9% more that you can provide your lender for your short sale.

Do I Need An Agent for My Short Sale?The Government recognizes this reality and therefore requires a real estate professional be involved in any short sale transaction under the Home Affordability Foreclosure Alternative (HAFA) Program.

Not only does it make fiscal sense, but a real estate transaction is a logistical nightmare. Unless there is absolutely no other responsibility you need to take care of, having an agent in the transaction makes your life easier.

What is a Financial Hardship?

Financial Hardship is any current, or anticipated, inability to meet one’s financial obligation.

This includes, unemployment, changes in relationship status (cohabitation, divorce, etc.), unanticipated medical expenses, loss of rental income.

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