The Short Sale Process Our Presentation Today Will Address the Following: What is a Short Sale? Who Qualifies For a Short Sale? What are the Benefits of a Short Sale? What Documents Are Required? What are the Benefits to Attorneys? What is Expected in the Process? Answers to Frequent Questions 1
What are a Distressed Homeowner s Options?
What is a Short Sale? A Short Sale is when the lender(s) and/or lien holder(s) agree to take less than is owed so the property can be sold. The property may be over-leveraged or underwater The property owner may be behind on mortgage payments & cannot sell s for high enough to cover what you owe plus other required fees to close. A short sale is an alternative to foreclosure Foreclosing on properties always costs lenders money: Attorney s s Fees, Taxes, Insurance, Winterization, Vandalism, Weather Damage, Stigma of being REO
Who Qualifies? In General to Qualify, the Seller usually is or has: Experiencing a true financial hardship Be in default on the mortgage Facing imminent default while in a Must Sell situation NO Equity in the home NO available assets
Who Qualifies? Most people facing foreclosure or a financial hardship who cannot sell their home for what is owed should qualify for a short sale. Each lender & loan type has a different set of requirements: This information can be found on a current mortgage statement or the settlement papers from the previous closing.
The Benefits of a Short Sale NO Foreclosure on Credit Generally NO money needed to close NO repairs necessary Sell AS-IS NO taxable event for those that qualify NO deficiency judgment if negotiated Out from underneath your mortgage debt NO Need to file bankruptcy A positive step towards home ownership in only 2 yrs.
The Paperwork The Lender Will Require a Minimum of the Following: Handwritten & Signed Hardship Letter Explain the situation, when it started, how it happened & what is being done to fix it A Financial Worksheet Everything that is spent on a monthly basis 2 Years Most Recent Tax Returns With W-2s W & all schedules 2 Months Recent Bank Statements All accounts & all pages 2 Most Recent Pay-Stubs Or, if unemployed, a statement stating such
The Paperwork To Communicate With the Lender, We Require the Following: An Authorization to Release Information aka. 3 rd Party Authorization Copy of recent mortgage statement(s) Copy of any correspondence received regarding the property from attorneys, lien holder(s), bankruptcy trustee, or probate. Any paperwork regarding any other liens and/or judgments. Property tax records Information about any Home Owner s s Association & any outstanding HOA dues owed by the Seller Information about any outstanding assessment/s on the property Negotiation Disclosures signed & dated
Pending Foreclosure Date? URGENT MESSAGE If a property is scheduled for a foreclosure sale date, be sure that you contact the Lender immediately. Lenders would rather postpone over 95% of the time than to get the property back. This can be achieved without filing for Bankruptcy.
The NAR Supports Short November 9, 2008 Sales Short Sales give many families in financial difficulties the possibility of salvaging their credit & avoiding the embarrassment of a foreclosure.. Realtors across the country stand ready to help, & NAR will work hard to ensure that short sales are a viable alternative to foreclosures whenever possible. - National Association of Realtors President Richard Gaylord
The Benefits to You, the Attorney Homeowners in distress need solutions from Attorneys because you: Will protect their interests Have specialized skills Maintain high ethical standards & integrity Offer Win-Win solutions like Short Sales
What to Expect? The Process often takes 3-43 4 months or longer to complete. Patience & Communication are the Keys to Success! 1. Property is Listed & Seller Documents Are Collected 2. Sales Contract Signed 3. You Submit the Short Sale Package 4. The Lender Orders BPO and/or Appraisal 5. You Undergo Negotiations with Lender 6. You Receive Approval From Lender 7. Title Work is Ordered & Completed 8. Property is Sold
What is a Basic Timeline? Get authorization on file with lender Compile short sale documents Get short sale package on file with lender 2 days 7-14 days 3-77 days Short sale package assigned to negotiator 10-14 14 days Get BPO/Appraisal ordered 14-21 days Schedule BPO/Appraisal with agent 5-10 days Time for BPO/Appraisal to get to negotiator 21-28 28 days Negotiate & obtain approval from negotiator 15-20 days Total: 77-104 days This timeline is in no way accurate for every lender. Some lenders ers are expeditious, others are buried with thousands of short sales & pending foreclosures. osures. FNMA, FDMC, FHA etc. expand this timeline & often work on their own schedules.
There Are No Guarantees As with any real estate transaction, there are No Guarantees. Short Sale Success is Based Upon: Stopping and/or Postponing a Pending Foreclosure Cooperation from any & all Lien Holder(s) Cooperation from & between the Seller & Buyer.
Common Mistakes Assuming that the short-sale sale process is easy & fast Listing a property for an amount to cover full payoff Not understanding that most lenders have a fixed minimum percentage of the BPO they will accept Not preparing for the crucial interior BPO Allowing the BPO to be done without being present Sending incomplete short-sale sale packages Not being patient & persistent with lenders Not knowing how to negotiate with lenders
Why Are We the Best Decision? We Know the St. Louis Market Your Local Team We Know How to Negotiate with Lenders We Are Obligated to Protect Your Interests Of Files Accepted, Over 95% Completion Rate Wholesale & Retail Short Sale Strategies
How Are We Paid? By the Investor Purchasing the Property A Fee Agreement Between REMP LLC and/or the Listing Brokerage, Interested Parties Directly By the Lender
Wholesale Short Sale Strategy
Retail Short Sale Strategy
F A Q How much time is left? Do I have to start now? It is best to begin a short sale when you realize you can no longer afford the mortgage. Missouri has a very short time period between notification & foreclosure. The earlier the process is started, the higher the likelihood of a successful short sale. Does the homeowner need to be in default to qualify for a short sale? NO. More and more lenders are considering short sale requests from homeowners who are not in default. However, the individual must be experiencing g a financial hardship that points to imminent default if unable to sell. What is better on my credit Foreclosure or Short Sale? Please consult your own financial advisor or the credit bureaus directly for the answer to this question. From experience only, we can say that foreclosure e is much more damaging to your credit. A short sale will most commonly be listed as settled debt and is much less harmful to your credit.
F A Q Will the homeowner get any money when the property sells? Maybe. The vast majority of loan types do not allow the seller to receive any proceeds from the sale of the property. If the property is secured by an FHA loan, the seller may qualify for their pre-foreclosure sale program that does have a selling incentive. Other Federal Government programs encouraging a homeowner to sell are forthcoming What if the homeowner files bankruptcy? Filing bankruptcy will not stop the foreclosure process, just delay it. The property will eventually be discharged from bankruptcy protection and be back in the foreclosure process where it was when bankruptcy was filed. For further bankruptcy information, please seek the advice of legal counsel.
F A Q What is a deficiency judgment? Any amount between what the property sells for and what is owed to the lender is called a deficiency. If this amount is a large amount of $$ and the homeowner has significant assets, the lender may pursue a deficiency judgment,, a legal instrument that allows the lender to file a law suit and pursue that homeowner for the amount owed. Depending on your situation you may or may not receive a deficiency judgment or taxable event. In Missouri, a deficiency judgment is possible, however it is extremely rare for a lender to pursue a deficiency. The loss for a lender is a tax write-off, so once the loss has been accounted for, the lender cannot pursue a judgment. Will I be liable for my lender s s financial loss? The deficiency is considered by the IRS to be phantom income and the lender is required to issue a 1099C to the homeowner. According to the Mortgage Forgiveness Act of 2007, any deficiency y on a homeowner s primary residence, up to $1 million, is forgiven by the IRS from now until 2012. It is best to consult an attorney or financial advisor for advice e regarding any debt liability.
F A Q What other advice should I seek? Be smart. Always seek professional advice from a qualified attorney and an accountant specializing in Short Sales/Pre-Foreclosure Sales. What about the federal government bailout programs? To determine your eligibility, please visit www.financialstability.gov We make no assurances or guarantees as to the information contained ned herein or the outcome for your property. 23