What is a Short Sale?

A short sale occurs when the sale of your home is approved by your lender(s) to be sold for less than what is owed.

What are the responsibilities of your Short Sale Listing Agent?

Explain the short sale process, qualifications, advantages, disadvantages/consequences, and its benefits.

To market and sell your home.

To facilitate the Short Sale process with your our processors, Attorneys, and your lenders to obtain a Short Sale Approval.

To negotiate on your behalf to protect YOUR interest, not the buyers and not your lenders.

There must be a hardship.
The hardship can be financial, personal, or property related.

Examples:
          o Financial
                    Loss of Job
                    Reduced Income
                    Failed Business
                    Medical Bills
                    Payment Shock – ARM reset
          o Personal
                    Illness
                    Job Relocation
                    Death of Borrower or spouse
                    Incarceration
                    Divorce or Separation
                    Military Duty
          o Property
                    Substantial Damage to property
                    (natural disaster or unnatural)

Consequences of Foreclosures & Short Sales?

Credit
          o Foreclosure and Short Sales are botht reated
             as serious delinquencies by FICO.
          o It is the event that leads to the Foreclosure or Short
             Sale that determines the overall impact of a credit
             score; events such as 30-60-90 days late on
             mortgage payments.
          o Contrary to popular belief, you do not have to be
             delinquent to Short Sale your property. Without
             delinquencies, you MAY have lesser damage to your
             credit score.
             (However, more and more banks are requiring
             borrowers to be delinquent in order to short sale)

   FICO score approximate – courtesy of "Credit Source One"
             30 day late payment: 60-110 points
             Debt settlement (short sale): 45-125 points
             Foreclosure: 85-160 points
             Bankruptcy: 130-240 points

Tax Liabilities
          o The difference between what the property is sold for
             and what is owed, can be taxable.
          o The Mortgage Forgiveness Debt Relief Act of 2007,
             MAY relieve you of any taxes owed if the home is
             your primary residence, so please speak with your
             Tax professional to see if you will qualify for tax
             forgiveness.

Deficiency Judgment
          o In Short Sales and Foreclosures, lenders may pursue
             a deficiency judgment. A deficiency judgment is a
             lien against borrowers for the amount required to pay
             the mortgage in full after the sale of a property.
          o If a lender issues you a 1099-C for the taxable
             difference, that lender cannot file a deficiency
             judgment.
          o We recommend having an attorney explain the legal
             consequences of Foreclosures and Short Sales to
             you.

Promissory Note
          o In some cases, you may be asked to sign a
             Promissory Note.
          o A promissory note is an agreement to pay the
             balance or the portion of the balance of your loan after
             the sale.
          o The amount is usually smaller than the actual loan
             and may be in the best interest of some borrowers.

Example:
          If you owe a second mortgage $100,000 and they are
          willing to waive their right to pursue a deficiency
          judgment in exchange for $15,000 to be paid over the
          course of 5 years, it may be worth your careful
          consideration.

What are the benefits of a Short Sale vs Foreclosure?
          o May stop the foreclosure process
          o An experienced Short Sale Agent can negotiate on
             your behalf to increase the chances of your lender
             releasing you (or decreasing the amount owed) of the
             balance and potentially lowering your tax and
             deficiency liability.
             (The second mortgage on a house may have up to 6
             years to come after borrowers for a deficiency
             judgment in both Foreclosure and Short Sale.)
          o The HAFA government program may allow those that
             qualify to be fully released of their mortgage debt.
          o In the near future, FICO will determine foreclosures to
             have a greater negative impact on credit scores.
          o After a Short Sale, one can typically purchase a
            home sooner than one that has experienced a
            Foreclosure.

Mortgage Guidelines as of 3/11/10

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In order to fully understand your situation and determine if a Short Sale is right for you, we will need to review your options and examine other possibilities. Please contact us for a free consultation and bring the required documents needed to process a Short Sale Transaction.

          o Last 3 months bank statements
          o 2 most current paystubs
          o 2 years tax returns
          o Most recent monthly mortgage statement for all loans
             on subject property.
          o Any notices of default from bank (if applicable)

After your free consultation, If you decide to Short Sale your property, there will be additional documentation needed in order to process your transaction.