Short Sale


What is a Short Sale?

A short sale is when your home sells for less than the debt you owe against the property and the lender(s) agrees to accept a short payoff. This means the lender(s) agrees to accept less than what is actually owed on the mortgage.

Once a homeowner emotionally detaches themselves from the property and is able to look at their financial situation, they are able to realize the property will likely not be worth what they owe for decades to come. For some the best solution is to try and work a short sale out with the lender(s).

FYI – Lenders generally accept short sales for 2 reasons: (1) The seller has a financial hardship, (2) The seller owes more on the mortgage than the home is worth.

The Pre Short Sale Process

This begins when you list your property for sale with us. We determine the current market value of your property by preparing a CMA (Current Market Analysis) to closely examine the competition in your area. We will strategically market, price, and position your home so that it generates offers and sells at an adequate price to satisfy the lender. Lenders require a specific package of information and documentation from you (Short Sale Package & Application) your short sale package and application must be complete and accurate. This is a critical and important step that must be done correctly. Not doing so will result in unexpected delays and/or the file being held or rejected.

Items we will need from you:

  • Third-party authorization form (authorization to speak to & negotiate with lender on your behalf)
  • Hardship letter ( written letter explaining a hardship)
  • Property & Borrowers Information on loan(s)
  • Financial statement (list of all income and expenses)
  • 2-month’s recent pay stubs
  • 2-month’s recent bank statements
  • Last 2 years of W-2s
  • Last 2 years tax returns
  • If self employed we will need a 6 months profit & loss statement
  • Most recent HOA statement showing current or past due amount (if applicable)

The Short Sale Process

The short sale process actually begins when an offer to purchase is received from a qualified buyer and accepted by the seller. From the time we submit the offer along with your short sale package to the bank, the final approval can take up to several weeks or months. This is a lengthy complex transaction that requires special attention to detail and tons of patients from all parties involved.

The Short Sale Process at The Bank:

  • Bank acknowledges receipt of the file.
  • A BPO (broker price opinion) is ordered to determine the current value
  • A negotiator is assigned.
  • Negotiations begin
  • The file is sent for review or to the investor.
  • The bank approves the short sale, issues an approval letter, and sets a closing date.

What Does The Bank Consider a Short Sale Hardship?

Generally that depends on the lender(s) considering the short sale request. A “hardship” is considered an unexpected form of a financial crisis. Lender’s accept short sales for two specific reasons: the seller has a hardship, and/or the seller owes more on the mortgage than the home is worth. The more proof of a hardship which a borrower is able to produce, the better chance they have of getting a short sale granted.

Some examples of “hardships” that are accepted by lenders are:

  • Job loss
  • significant income loss
  • Job relocation
  • Military relocation
  • Divorce or split of domestic partners
  • Unforeseen increase in living expenses
  • Payment adjustment (adjustable rate mortgage)
  • Death of principal mortgagor
  • Death of mortgagor’s family member
  • Inability to sell due to no equity
  • Unable to rent property
  • Incarceration

FYI- The fact that your home is “underwater” (you owe more on it than it’s worth) is not, alone, considered a significant hardship by most lenders.

What is NOT considered a Short Sale Hardship:

  • Current on mortgage payments
  • Collecting rents from tenants & not paying your mortgage
  • Bank statements showing excessive purchases
  • Substancial funds in the bank after paying expenses.
  • Simply wanting to short sale you property because it’s underwater to upgrade to a new home.

The Hardship Letter

A Hardship Letter is one of the required documents which must be offered to a lender to qualify for a real estate short sale.The basics of this letter is to inform a bank or lender the reason(s) which you are now unable to fulfill your financial obligations. The short sale hardship letter can be typed or handwritten, In my opinion a handwritten letter is better. I’ve included some examples below to help you on writing your letter.

  • Be honest and represent the facts clearly.
  • State exactly what you are requesting. (Short Sale)
  • State the circumstances which have caused you to fall behind on your house payments.
  • Do not whine or complain. Avoid playing the blame game when writing your letter.
  • Be Sincere. Make the letter as personal as possible. Grab at the heart of the fellow human being reading this.
  • Mention that you are considering or are on the verge of filing bankruptcy, but would prefer to avoid doing so.
  • If you don’t feel sorry for yourself or have a lump in your throat by the time you have finished, you didn’t do a good job.

3 Examples of Hardship Letters:

 

Example #1.

 

(Date)

(Lender’s name)
(Lender’s address)
(Lender’s customer service number)
(Lender’s fax number)
RE: Hardship Letter – Short Sale

 

(Your name)
(Your address)
(Account number)

 

Dear Creditor:

 

Since last (month) I am experiencing financial difficulties due to (layoff, medical problem, etc).

After having my current financial situation carefully analyzed, I have concluded that it is no longer possible to comply with the original terms of the agreement. I have no choice but ask you for your help on avoiding the foreclosure of my family’s home.

Due to the dropping of home prices that have affect the entire country in the last year especially in the Las Vegas market, I currently owe more on my mortgage than my home is actually worth.

Please consider allowing me into your Short Sale Program so that we can lower the price and sell the house quickly before it goes into foreclosure. This will allow me to settle my financial obligation to you and have a chance to get back on my feet, without having to file for bankruptcy.

I am very sad and quite embarrassed to be in this position. Please understand that financial hardships can occur and many times it‘s not a choice. I deeply appreciate your help in this matter. If you have any questions, or need anything further from me, you can contact me at (your phone # with area code.) or my Realtor (Eloff Perez 702.677.0558)

I am enclosing my (bank statements, late notices on your car, last year’s tax returns, last 6 months of Profit and Loss statement (if self employed), last 2 pay stubs for all working borrowers (including L&I and unemployment benefit.) Authorization to disclose personal information and anything else you can find that will show full proof of the hardship)

I, (your name), state that the information provided above is true and correct to the best of my knowledge.

 

Sincerely,

(Your signature)
(Print name)

 

Example # 2.

 

(Date)

(Lender’s name)
(Lender’s address)
(Lender’s customer service number)
(Lender’s fax number)

RE: Hardship Letter – Short Sale

(Your name)
(Your address)
(Account number)

 

Dear Creditor:

 

I purchased my home at _____________ in ___________. At that time I was employed by _______and business was very good. My salary and the possibility of a promotion and raise made me sure that I could easily support my mortgage. Unfortunately, a downturn in the market caused my company to reduce its workforce and I was laid off.

I’ve struggled for several months to make my mortgage payment, and was also hit with some medical payments that I did not expect. I recently put my home up for sale, however, there were several problems that I did not have enough money to fix such as a broken fence and a leaky roof.

I sincerely apologize for not being able to comply with the terms of my mortgage. I am very stressed and embarrassed to be in this position.I really love my house, but I know that I cannot afford it. I am a single parent, seeking employment with few benefits and no savings.

My financial situation cannot sustain a home mortgage of nearly $_____per month. I want to sell the home, avoid foreclosure and salvage my credit. I know that a foreclosure on my record will affect me for years to come. I would ask that you please assist me in avoiding this.

Please accept this offer as payment in full. My attorney has advised me to file bankruptcy, but I prefer to avoid further destruction of my credit. I respectfully request that a short sale be granted, otherwise, I will have no choice but to file bankruptcy for my own protection. I just want to move on and start over.

I deeply appreciate your help and understanding in this matter. If you have any questions, or need anything further from me, please contact my Realtor. Eloff Perez 702.677.0558

I, (your name), state that the information provided above is true and correct to the best of my knowledge.

 

Sincerely,

(Your signature)
(Print name)

 

Example #3.

 

(Date)

(Lender’s name)
(Lender’s address)
(Lender’s customer service number)
(Lender’s fax number)

RE: Hardship Letter – Short Sale

(Your name)
(Your address)
(Account number)

 

Dear Creditor:

 

We purchased our family’s home in (date).

Since then, as you know, our country particularly Las Vegas has experienced one the biggest housing market crashes in history. This, combined with the rising food and gas prices and current slow down in the economy, has affected our ability to pay our bills on time.

Our adjustable interest rate mortgage payment has increased from ($) to ($) since we first purchased the house making it especially hard to keep it current. In the last couple of years our home has lost about (55%) of its value making it impossible to refinance it since the equity we once had is now gone.

In the last three months our family’s economic situation has gotten even worse because (explain what caused the financial hardship. Ex: job lay-off, death in the family, medical emergency,…) and we can no longer afford the new payments.

At this point we are trying to avoid foreclosure and/or bankruptcy and would like to discuss with you the possibility of getting a short sale approval that could be beneficial for both parties.

Enclosed, please find copies of our financial statements. (include documents that offer proof of financial hardship: Copies of any unpaid bills and/or late notices you have received in the last six months. Including: credit cards, car payments,…Past two months of Proof of Income. Including: past two months paycheck/paystubs, social security,… Last quarter’s profit and loss statement if self-employed, past two years of federal income tax returns, past two years W-2’s, and last two months of bank account statements.)

We truly appreciate any effort you can make to help our family through this situation. Please feel free to contact our Realtor, Eloff Perez 702.677.0558 with any questions.

I, (your name), state that the information provided above is true and correct to the best of my knowledge.

 

Sincerely,

(Your signature)
(Print name)

 

  • This information is meant for general information purpose only is not to be construed to as tax or legal advice. Please consult your CPA or Your attorney for legal counsel.

 

Contact us today. Las Vegas Realty Specialists can assist you with all your real estate needs. Put our extensive knowledge and expertise to work for you!

 
 

“The market has changed, but the way to treat people hasn’t”

 



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