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Myth #1: I have to be an owner occupant to qualify for a short sale. Where did this myth come from? I’ve done short sales for investors and non-owner occupants. They happen all the time. I just listed a home where the lender told the owner to do a short sale on their rental property. You can sell your investment or rental property via short sale.

Myth #2: I’m upside down and that is not enough to qualify for a short sale. First off, rarely do people want to short sell just because they are upside down. Usually there is a trigger: a job loss, interest rate change, divorce, etc. Every lender uses different criteria to approve short sales. The handwriting is on the wall, and some lenders understand that being severely underwater means you are at risk for default later on down the road. Many lenders prefer short sales to loan modifications. Being upside down impairs your ability to sell your home which can be a financial hardship.

Myth #3: I need to be bankrupt to qualify for a short sale. In cases where a borrower has assets, many times banks will negotiate a small contribution in exchange for approving a short sale. They don’t advertise this fact openly, but it occurs with regularity. Sometimes, no contribution from the seller is required at all. You don’t have to be completely broke to qualify for a short sale.

Myth #4: I need to miss payments to qualify for a short sale. Banks approve short sales without missed payments. This is also better for your credit. If you know that the time is fast approaching that you will not be able to make your payments, you can approach your lender about a short sale while you are still current.

Myth #5: I can’t afford to pay a real estate agent’s commission so I can’t afford a short sale. Typically, you don’t have to pay your real estate agent’s commission when going through a short sale. All the major expenses of selling your home are included in a short sale. This includes escrow, title and real estate commissions. The real estate commission is deducted from the lender’s “net recovery” as an expense of sale.

* Those considering a short sale are advised to consult with their own attorney for legal advice, and their tax professional for tax advice prior to entering into a short sale listing agreement — this article does not offer legal and tax advice

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Tni LeBlanc, JD, M.A., e-PRO, CDPE
Mint Properties
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(805) 878-9879 (mobile)
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Santa Maria Real Estate Blog

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Tni LeBlanc, JD, M.A., e-PRO, CDPE
Mint Properties
DRE License # 01871795
(805) 878-9879 (mobile)
tni@mintprop.com
Santa Maria Real Estate Blog

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Jul 02 2010

Real Estate Short Sales in the Santa Monica Market

Posted by Usual in Lender Approved Short Sales, tags: Estate, Market, Monica, Real, Sales, Santa, Short

With foreclosures on the rise in Southern California, the team at REALESTATE-SANTAMONICA.COM has been getting a lot of inquiries about short sales. Mostly people are asking what they are. Well in short…no pun intended, a short sale is a transaction where the lender is willing to take less money than what is actually owed on the mortgage. The point behind this is to avoid a foreclosure.

Foreclosing on a home is something that the bank as well as the borrower usually tries to avoid. When the borrower defaults on a mortgage (doesn’t pay for months in a row), the borrower begins to accrue much more than just the mortgage payment. Quickly other expenses begin to add up, such as late fees, attorney fees etc…not good.

With a foreclosure the lender can lose nearly half of the mortgage amount because of the costs involved in foreclosing on a property: attorney fees, lost interest, property maintenance, court costs etc. Foreclosure is also a very drawn-out process. It can take over a year in some states. Because of this, many lenders are amenable to a short sale over a foreclosure so that they can simply cut their losses and move on.

Short sales can also be in the homeowner’s best interest as well. Most agree that the primary benefit to the homeowner is that he/she is able to get out from under the mortgage without suffering through a foreclosure. Additionally, the homeowner’s debt is getting taken care of for much less than is actually owed on the home. The homeowner’s credit is usually spared some of the wear and tear caused by foreclosure as well.

What is the process?

When a homeowner gets behind on the mortgage and wants to try and avoid foreclosure, the lender must be contacted immediately. The last thing a lender wants to do is foreclose, but there is a process that needs to be started to make a short sale possible.

The lender will usually require quite a bit of information including:

- Hardship Letter. Basically the homeowner is telling the lender the story behind being late with the mortgage. Additionally the letter should request a short sale.

- Bank Statements. This is to verify assets…or sadly, the lack thereof.

- Income documentation. W-2’s or 1099’s to verify the borrowers’ income.

- Value of Home. Banks will either order an appraisal or a CMA “comparative market analysis.” CMA’s are generated by realtors and we at realestate-santamonica.com can help with that.

- Listing Agreement. This just documents that the home has been put on the market. After it sells, the purchase agreement is included as well.

With any luck the lender will approve the short sale and the home will not go into foreclosure. If the short sale occurs, a preliminary proceeds sheet is generated. This document lists the net proceeds of the sale after the mortgage is paid off, as well the closing costs and all other related fees. This amount will be negative…and is the shortage.

Potential Consequences

Before requesting a short sale, a borrower should consult with his/her attorney and/or accountant as there are a few things to be mindful of.

First, the lender may require the borrower to sign a note to repay the shortage. Also the lender may file a collection or judgement to recover the shortage. A good real estate attorney will be able to guide the borrower through this.

The IRS may also come calling for the income taxes owed on the amount of the shortage. A tax professional should be contacted by the borrower regarding this.

Hopefully this shed a little light on the world of Short Sales and remember REALESTATE-SANTAMONICA.COM is here to help you.

As a respected and experienced Santa Monica Real Estate agent and Realtor, Colin Whelan brings his knowledge to the public in order to empower buyers and sellers www.realestate-santamonica.com

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Apr 28 2010

Santa Clara County sees rise in short sales

Posted by Usual in Lender Approved Short Sales, tags: Clara, County, rise, Sales, Santa, sees, Short

Santa Clara County sees rise in short sales
About one-third of the homes now on the market in Santa Clara County and one-sixth in San Mateo County are owners seeking short sales.

Posts Tagged “Santa”

Top 5 Short Sale Myths: A Message to Santa Maria Short Sale Sellers

Real Estate Short Sales in the Santa Monica Market

Santa Clara County sees rise in short sales

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