What is a Short Sale?
It’s a real estate transaction where the seller’s lender agrees, per seller’s request, to sell the property for less than is owed on the mortgage and usually forgives the balance (if the seller is in legitimate financial hardship), in order to avoid foreclosure and minimize financial damages.
Short Sale allows the property owner who is in some kind of financial hardship or is forced to relocate, to sell the property for less than is owed in mortgage(s).
Short Sale Example: Bank allows to sell a property for $180,000 on which $220,000 is owed in mortgage(s), forgives the difference and agrees that the seller’s closing costs be paid in full by the bank.
Why Banks agree to take such a huge loss? Banks know that should the property go into foreclosure, by the time they fully repossess it, the property’s condition will most likely deteriorate, consequently resulting in much lower sales price. In addition the bank avoids expensive costs of foreclosure and a burden of owning and maintaining the foreclosed property which will have to be sold eventually, anyway.
– Do not abandon your property!
– Don’t let it go into foreclosure!
– Let us negotiate a short sale for you!
There are no out-of-pocket expenses to my short sale clients for any of our short sale service (we are paid by the bank)!
short Sale Eligibility.
Most lenders agree to consider a short sale, however the seller must be able to provide evidence of some kind of hardship to get it approved.
Important. Please let us know if you have signed up (or considering) the following: Loan Modification, Forbearance, Deed in Lieu or Bankruptcy, as these may delay the short sale approval process or even make it impossible while they are pending.
If you have signed up for a loan modification, the bank will not consider a short sale at the same time. You must wait until the loan modification review is completed or withdraw your request..
Options To Consider Before a Short Sale.
Refinancing. Short Sale should be your last resort in order to avoid foreclosure. Try to refinance your mortgage loan first.
Sell The Property. Contact me and I will run the numbers to see if we could still sell your property so you can ‘break even’ without doing a Short Sale.
Loan Modification. Notify your lender of your financial or economic hardship, explain why you can’t afford to no longer make mortgage payments and ask if they could offer any assistance to modify or re-structure your existing loan into something that you could live with (reduced mortgage payments, lower interest rate, etc..).
Where do you see yourself in 3 or 6 months?
– if you want to keep the property and think you might be able to get back on track with your mortgage payments but need some assistance from the bank, you should contact your lender and ask for a Loan Modification (i.e. interest rate adjustment) or a Forbearance Plan to temporarily reduce, delay or even freeze payments.
A borrower who is willing but unable to make payments, may request forbearance from the lender. Forbearance allows payments to stop temporarily or decrease in amount for a specific length of time. Some lenders might be willing to temporarily reduce or even freeze your mortgage payments, to help you get back on your feet, financially. The lender may grant forbearance of principal, interest or both. The borrower is responsible for repayment of accrued interest charges.
Deed in lieu of foreclosure.
A deed in lieu of foreclosure occurs when the borrower voluntarily conveys all interest in a real property to the lender to satisfy a loan that is in default and avoid foreclosure proceedings. Deed in lieu requires bank approval and is rarely exercised in Illinois, most lenders don’t want to own and maintain properties.
Do you want to keep the property?
If you would like to keep your property, then try the options above first. If you are not willing or unable to keep the property or a loan modification/ forbearance or deed in lieu have been declined, then a short sale should be the option in order to avoid foreclosure.
If you have decided that a short sale is the best option for you. We will need the following documents listed below, in order to get the short sale optimized for success. I can fax or e-mail the forms to you ahead of time to expedite the process.
Short Sale Process Overview.
To start, we will need the following:
1.) LISTING AGREEMENT – sellers signs a listing agreement, short sale addendum & authorization form.
2.) HARDSHIP LETTER – a brief, written explanation of your financial hardship signed and dated by each borrower (examples available)
3.) FINANCIAL WORKSHEET – disclosure of income, assets, expenses and liabilities (form available)
Your lender may also request that you provide the following to prove your financial hardship:
4.) MOST RECENT BANK STATEMENTS – checking, savings, money market accounts, etc…
5.) TWO MOST RECENT PAYROLL STUBS – or letter of explanation if not available: “I don’t get payroll stubs because I’m self employed.”
6.) COPIES OF THE LAST 2 YEARS OF INCOME TAX RETURNS
**or letter of explanation if these are not available: “I don’t get pay stubs, I don’t have bank accounts, I’m unemployed, etc…”
7.) PURCHASE OFFER. A Short Sale can not be completed without a purchase offer. My job as your listing agent is the marketing of your property in order to bring as many offers as possible. My short sale negotiators will then submit and get one of the offers approved by the bank. The offers must be justifiable by recently closed comparable properties in the same neighborhood. The offer is submitted to bank for consideration while the property is being marketed for back up offers. Bank assigns a negotiator (1 to 4 weeks). Bank orders a property appraisal (1 to 4 weeks). The appraisal comes back (3 to 5 days). Bank compares the appraised value to the offer received and responds (1 to 4 weeks). If one of the offers is approved by the bank, the closing is scheduled. Foreclosure gets dismissed.
**Shortsale must be an “arms-length” transaction. The property may not be sold to the sellers family members.
**The seller (or tenants) must agree to cooperate with the listing broker and make the property available for showings to potential buyers.
**The seller must agree to move out prior to closing, usually 4 weeks after the purchase offer is approved by the bank.
How long will it take? – It usually takes about 1-3 months to get a decent offer and another 1-3 months to get the offer approved by all lenders/ lien holders.
BRENDA KASPRZYK — specializing in short sales and foreclosure properties in Chicago & Suburbs, Illinois.