Auburn Maine Real Estate- Auburn ME Homes For Sale - Property Listings

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The Dot Fernald Team - a Group of Dedicated Realtors® Selling Real Estate in Central Maine

Short Sales

 

Recently, I have been asked several times what a “Short Sale” is.

There are many ways to lose a home, but signing away ownership in a manner that destroys credit, embarrasses the family and strips an owner of dignity is one of the hardest.  For owners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or the foreclosure proceeding.  One of those options is called a “Short Sale”. 

More than 30% of our business is short sales.  That’s how prominent short sales have become.

When lenders agree to do a short sale in real estate, it means the Lender is accepting less than the total amount due for the mortgage.  Not all Sellers or all properties qualify for short sales.

Why do lenders accept short sales? Lenders almost always lose money when they foreclose on a property. In many cases, they will lose less money through a short sale than they would by foreclosing on the home and selling it as a bank owned property.

Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect.

A short sale can only begin once there is an offer on the property.  This is why the property should be listed for sale with a real estate broker with short sale experience as soon as the borrower has made the decision to try to obtain a short sale.

However, there are rules…

 

1.  Call the Lender

You may need to make a half dozen phone calls before you find the person responsible for handling short sales, and the reason for the call is to let the Lender know that you are experiencing hardship, and request a short sale package from the lender.  Once you receive the package call your real estate agent.

 

2.  What you will need to submit a “Short Sale Package”

You will need a Hardship Letter explaining the reason why you can no longer make your mortgage payment, and the sadder, the better.  This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment.  Lenders are not in humane and can understand if you lost your job, were hospitalized, a death, a divorce, etc., but lenders are not particularly empathetic to situations involving dishonesty or criminal behavior.

Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value.  Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.

The lender will request bank statements, tax returns, pay stubs, and a financial statement.

The lender will request from the real estate agent a copy of the Listing Agreement, a Purchase and Sale Agreement, a copy of a Market Analysis, and a closing statement (HUD).

 

3.  Submit Letter of Authorization 

The real estate agent can assist you in every step of the process. In order, for this to happened, the lender will need an authorization letter. That letter must include the borrower name, property address, loan number, and the name of the agent, date and signature. The lender will not be able to negotiate with the real estate agent without the signed authorization letter from the borrower. If you are working with a real estate agent, give them a call.  All experienced agents will have a generic authorization letter, and all they will have to do is add your information and have you sign it giving them permission to talk with the Lender.

Now, if everything goes well, the lender will approve your short sale.

If the lender does forgive part of the debt, the debt forgiveness is taxable income. The IRS will require that taxes are paid on the forgiveness as income. However, there are exceptions. If the short sale is on a principal residence and is the first lien only, it may not be considered as ordinary income.  It is highly recommended that a tax professional is consulted to get expert advice on this situation.

 

Call the Dot Fernald Team, the short sale specialist, at anytime and we will answer all of your questions…………….

 

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