The-Short-Sale-Expert.com

There is a lot of attention on short sales in our Bradenton - Sarasota, Florida market right now. Buyers can find a good home and purchase it at a discount.

Everyone involved in a short sale transaction needs to know what to expect.  Buyers of short sale properties need to understand what they are getting into. Some buyer’s believe that they are going to be able to “steal” a property and make a killing by reselling it.  They have heard the stories that investors tell and think it’s a piece of cake to buy a property at fifty cents on the dollar.

While that may be the case in some instances it is not the norm and should NOT be expected. Remember, the lender wants to sell the property as close to market value as possible.  In fact, most lenders have pretty rigid guidelines as to how far below market value they will sell for.  Beyond that point, they will take the house back in foreclosure. Today’s lender is expecting about 83% of the market value of the property.

For the seller, the best buyer is what I call the “end-user” buyer.  That is, a buyer who is actually going to live in the property.  If you sign a contract with an investor who is looking to offer only 50% of market value, it is unlikely that the sale will be approved.  Plus, you will lose valuable time looking for a new buyer.

So, what do “end-user” buyers need to know?

1. Buyers need to know that short sales require patience.  It may take 2-4 months to complete the transaction.
2. Buyers must be be pre-approved before submitting an offer.  The borrower’s lender is going to require proof of funds if it’s a cash deal or a commitment letter if there is financing involved.
3. A buyer offering to close quickly with a substantial down payment is more attractive than one seeking 95% financing.
4. Buyers may not want to spend money on a home inspection or appraisal until after the short sale is approved.
5. Buyers should expect to buy the home in it’s as is condition.  The seller doesn’t have any money to make repairs and the lender is going to require an as-is offer.
6. Buyers should only work with a Realtor who is knowledgeable about the short sale process. Inexperienced agents may hinder the transaction.
7. I recommend the buyer work with a short sale expert, like myself.

(Copyright © 2007 By Dan Forbes, All Rights Reserved.)

Negotiating a short sale between the borrower and the lender takes skill, patience, and expertise. Everyone involved in the transaction needs to know what to expect.  The Bradenton Florida Short Sale Expert is here to help Bradenton - Sarasota, Florida homeowners understand short sales. If you live outside the Manatee County, Florida area you will also find this information to be helpful.

Here’s What Bradenton - Sarasota, Florida Sellers Need to Know about Short Sales:

1. Your credit rating will drop after a short sale, but not as much as with a foreclosure. I have seen estimates of a drop of 80-100 points off one’s FICO score. That kind of drop is far less damaging than what a foreclosure does to one’s credit score.
2. You will receive a 1099 for forgiven debt and may owe taxes on the amount. That may change soon.  At the time of this writing there is a bill before the Senate that, if passed, will eliminate the taxed owed on this type of forgiven debt.
3. If the Seller meets the IRS definition of insolvency, (debts exceed assets), they will not have to pay taxes on the forgiven debt. I am not giving you tax advice, that’s not my expertise.  I am encouraging you to talk with a competent tax accountant about how a short sale may affect your tax situation.
4. The lender may ask the seller to sign a promissory note for all or part of the forgiven debt as a condition to the short sale.  This could be attached to other assets if the note is not paid when due. This may be rare, but it has been known to happen.  Remember, everything is negotiable.
5. The US House of Representatives has passed the Mortgage Cancellation Tax Relief Act (H.R. 1876), which would eliminate taxes on any forgiven debt on a principal residence through a short sale or foreclosure.
6. Chances of getting a mortgage during the next 12 months are almost zero. However, if you have paid all your other bills on time, your credit score will probably improve rather quickly.
7. The short sale process may take months. This is no quick process.  It can easily take three to four months at least.
8. Buyers may not have the patience to wait for the lender’s approval and may back out. This is a risk the seller takes when a contract is signed.  It is advisable to make sure the buyer understands the short sale process and is willing to hang in there for the time it takes.
9. All commissions, expenses, fees, and closing costs can be wrapped into the short sale so the seller has no money out of pocket at closing.
10. There is virtually NO COST associated with the short sale transaction for the seller.

I hope this information is helpful to you. The more you know, the better decisions you will make.

(Copyright © 2007 By Dan Forbes, All Rights Reserved.)

The Bradenton, Florida homeowner can expect the short sale to be very time consuming. The short sale process requires patience from everyone involved: seller, buyer, Realtor, and lender.

Most lenders won’t even look at the short sale package until you have an offer. Then they want the whole package sent at one time. Approval may take two weeks to two months. Some short sales may take as long as 3-4 months from beginning to end.

The Lender has the final say. Remember, the lender is the one who approves the short sale 100% of the time. Therefore, your proposal must make sense to the lender. The job of your REALTOR® is to convince them that the buyer’s offer is better than taking the property through foreclosure. If there is more than one lender, your REALTOR® will have to negotiate with each of them separately.

You are probably understanding more and more why you need a short sale expert on your side.

(Copyright © 2007 By Dan Forbes, All Rights Reserved.)

In our Bradenton, Florida real estate market we find that not all short sales are approved by the lender. However, this is true in any real estate market.  So, no, not all short sales are approved.

Keep in mind, the lender has two goals: (1) to NOT take back the home in foreclosure; (2) to limit their loses.  They will negotiate to get as much money as possible from the new buyer.  Sometimes those negotiations break down

It is often necessary to remind the loss mitigator that the goal is to sell the home and avoid foreclosure. For this reason your REALTOR® should be a skilled negotiator.

The short sale process is an attempt to stop foreclosure.  While the home is on the market the lender will continue down the foreclosure path, while we go down the short sale path.  Our goal is to complete the short sale before the lender forecloses.

(Copyright © 2007 By Dan Forbes, All Rights Reserved.)

If you live in the Manatee County, Florida area and are considering a short sale, I can help. If you live in another area, I can help you find a short sale expert near you. You will want to work with an experienced Realtor who understand the short sale process and who is an expert in short sales.

Most lenders require that the home be listed before they will consider a short sale. They want to be sure the home has been exposed to buyers and that an attempt has been made to obtain a contract at today’s market value.

It is important for the borrower to work with a Realtor who is experienced in short sales.  This is a complicated process and the successful completion of it requires patience, skill, and expertise.

Here are few things the listing Realtor must know how to get accomplished:

• Know how to establish contact with the lender’s loss mitigation department. Contact the loss mitigation department, rather than the collection or customer service departments, which are only interested in collecting payments.
• Obtain a signed authorization from the seller that allows the Realtor to speak with the lender in their behalf. Include their social security number and date of birth because this information is often needed to verify the account.
• Obtain mortgage information from the seller.  Name of lender, loan numbers, and phone numbers.
• Know how to order a title search on the property to research liens and judgments. All of these are expenses in the sale and will appear on the HUD-1 settlement statement.
• Order payoffs so that you know the exact numbers for the settlement statement.
• Know how to obtain a status letter from the Home Owner Association because many times there are back HOA fees.
• Know how to obtain a short sale package from the lender.  Some provide them, some don’t. If the lender does not have their own package the Realtor must create one of their own.
• Know how to assist the borrower in compiling the documentation needed for the lender.
• Know how to assist the new buyer in obtaining a mortgage pre-approval and counsel the buyer regarding the short sale process.
• Know how to ”influence” the BPO or appraisal.  Provide comps if needed.
• Assist the seller/buyer in obtaining repair estimates.
• Negotiate, negotiate, and negotiate.  Negotiation skills are a must.
• Stay in touch with the lender throughout the process.

Most sellers pay thousands of dollars for their Realtor’s service in Bradenton, Florida.  The good news for the short sale customer is that my services are virtually FREE.  The lender absorbs the Realtor’s commission into the transaction.  The seller pays no commission!

(Copyright © 2007 By Dan Forbes, All Rights Reserved.)

When I am working with a Bradenton, Florida short sale transaction one of the first things I do is gather the proper documentation.  Each lender has their own list of documentation they will require to approve the sale.  We commonly call this the “short sale package.”

Keep in mind that the lender does not want to take the home back through foreclosure. That is a last resort for both the homeowner and the lender.  The lender would rather accept a short sale as long as the borrower can show an inability to pay the mortgage.

The purpose of the short sale package is to document the borrower’s hardship.
Each lender has their list of required documentation.  Therefore, the first step is to give your Realtor signed authorization to speak with the lender about your account.

Your Realtor will then request a “short sale package” from the lender.  Most lenders require the following documentation.

• Copy of the Listing agreement with your Realtor.  Some lenders may require that your home be listed for 60 days or more.
• Hardship letter.  A handwritten letter may be better to explain the borrower’s situation and requesting a short sale. It should describe why the borrower cannot make their mortgage payments and their fear of possible foreclosure.  It should be a plea for the lender to consider a short sale.
• Two years of tax returns and W-2’s.  Remember to provide signed copies of tax returns.
• Signed IRS Form 4506 “Request for Copy of Tax Form”.  This is so that the lender can verify that the submitted returns actually match the originals sent to the IRS.
• Two most recent bank statements (checking and Savings). Be sure to copy both side of double-sided statements.
• Two most recent pay stubs
• Current debt, payments and a household budget
• Documentation supporting the hardship (termination of employment letter, disability letter, doctor bills, etc.)
• A current Comparative Market Analysis (CMA) from a real estate broker or appraiser
• Estimated net sheet from a title company.  The settlement statement will show all of the expenses related to the sale with the seller receiving zero.
• A copy of the executed sales contract with buyer’s proof of funds or loan commitment.

Never submit an incomplete package.  Some lenders receive hundreds of requests a day. It is not uncommon for a loss mitigator to have 200 - 400 files in which they are working.  Incomplete packages will be set aside and you will have to start over again.

(Copyright © 2007 By Dan Forbes, All Rights Reserved.)