The Basics of Short Sale/Short Pay
I have come across dozens of properties in foreclosure with little or no equity that is seller/current owner owes more than the property is worth. In these situations, lenders are sometimes willing to accept less than the full amount due, commonly referred to a “short pay” or “short sale.”
Negotiating a short sale can be a very tedious process, generally because it is a daunting task finding a bank officer who has the authority to accept discount. If there is one he/she is overwhelmed. But, once you are in communication with the bank officer the negotiation starts.
The most important factor in a short sale/short pay is:
- Hardship
Examples:
1. Unemployment
2. Divorce, legal separation
3. Death
4. Payment increase
5. Medical Bill
6. Damage Property
7. Military
Every situation is different. The most important step is to get a short sale/short pay package from the lender (usually the department is “The Loss Mitigation Department”) to whom you have the mortgage with. This process is like a backwards application, you must prove that you are broke and unable to afford the payments. You must show you have no other source of income or assets to repay the loan. (Example of assets; money in the bank for a wedding, kid’s college, to buy a car etc…) You basically cannot have savings account or any other assets. There are exemptions for pension fund and 401 k.
You must provide the lender with a “hardship letter” which is basically a sob story about how much financial trouble you are in. This may require a little creativity, and some help on your part. Don’t lie; just paint a picture that doesn’t look good.
Once, the loan officer has received your package, he/she will request an appraiser to evaluate the property (typically they refer this as a broker’s price opinion BPO). The loan officer will also review the contract in which you entered into with the lender. Most important to the lender is what the property is currently worth. You can also submit your own appraisal or comparable sales information; you may contact me, LindaCastellanos.com for assistance. I may help you in obtaining information on your local market, copies of newspaper articles with “bad news.” This is most important. If you are deciding to sell your home you must have listed and have a ready, willing, and able buyer to purchase your property. This is why you must contact me. The reason for a written contract between you and the buyer is to assure the lender that you are not walking away with any cash from the sale.
The Short Sale or Short Pay market can be very beneficial to buyers since they will be getting a property which can be less than the current market. It is not a for sure transaction since the lender takes a long time to decide if they will approve the short sale while we are waiting the date for trustee sale is approaching ( the foreclosure sale) Even with this in mind a short sale/short pay purchase can definitely be worth it in many occasions.
The Short Sale or Short Pay for a property owner is an option to relieve you from your hardship with out having a foreclosure which can really affect your credit profile and A new tax law can provide you with a debt relief on the gap between what you own and what it sold for.
Should you not be up to the challenge of dealing with the process there are companies who specialize in the short sale/short pay process they cannot guarantee the short sale/short pay put no one can anyway. This will cost you about $500.00 up front cost but if you put it in prospective it will be the best investment. I welcome you to contact me, LindaCastellanos.com and I will give you real estate advice at no charge. Just remember my motto: A well informed client makes a well informed decision.
For more information please visit www.WeSpeakRealEstate.com
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