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IT'S NOT TOO LATE!
Definition: A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.
How to do a short sale
If loss of a job, health problems or other hardships have made it impossible for you to continue making payments on your home, you may consider doing a short sale to avoid damage to your credit rating, bankruptcy, foreclosure or all three. A short sale occurs when the loans outstanding against a property are more than what the home could be sold for. To do a short sale, it is recommended that you enlist the expertise of a professional Real Estate who is experienced in this area.
Steps in the Short Sale Process
1. Verify the value of your home - I can determine the value of your home and tell you how much you can expect to sell it for.
2. Put together a Preliminary Net Sheet - This is accomplished by totaling the amounts owed against the property including:
- Loan balance
- Outstanding payments
- Late fees
- Real Estate commissions
- Title and escrow fees
- Attorney fees
- Unpaid property taxes
- Notary fees
- Other fees associated with selling a property
Next, subtract all amounts owed against the property from the estimated sale amount that you will get for the home. This will be a negative number, if it is not, you will not be able to do a short sale.
3. Contact your lender to discuss their procedures for doing a short sale. Some lenders may forgive the outstanding balance after the sale; others may still hold you responsible for the balance owed.
4. Submit to your lender a Letter of Authorization giving them permission to discuss your situation with your Real Estate agent, attorney or others that may be involved. Include the following in your letter:
- The address of the property
- Your loan reference or account number
- Your name
- The date
- Your agents name
- Your agents contact information
5. Submit to your lender a Hardship Letter. It is important to be honest while still creating a clear picture of your dire financial situation. If you lost your job due to a permanent injury or layoff, include the details of this in your letter. The purpose here is to persuade the lender that you have no other options and it would be in their best interests to accept less than the full amount owed on the property in question.
I can provide you with a Comparative Market Analysis to show the lender if a decline in the real estate market is a contributing factor in your inability to sell your home for the loan amount owed.
6. Provide your lender with proof of your income and assets. Also include copies of your bank statements. Be prepared to explain any depositis or withdrawals that appear unusual to the lender.
7. Send your lender a copy of the purchase agreement between you and the potential buyer of your property. Be aware that the lender is likely to re-negotiate some of the terms of this agreement to protect their best interests. A lender will not pay for things typically paid by a seller.
Summary
Follow the advice of your Real Estate agent, Renee Errante, to successfully negotiate the terms of a short sale. Also be sure to consult your accountant. The IRS will treat your debt relif as taxable income. There may be options available to you under the Mortgage Forgiveness Debt Relief Act of 2007.
*Please Note: This is not intended to replace legal or accounting counsel. I recommend you seek the advice of your attorney should you have any questions.
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