SHORT SALE VIDEO I

  • A short sale is selling the property for less than what is owed, and hopefully getting the lender to accept the sale as paid in full.
  • Karie is Short Sale Foreclosure Certified and can assist you with Buying or Selling a a Short Sale Home.

WILL ALL LENDERS CONSIDER A SHORT SALE?

  • Yes, according to the lender’s own rules and guidelines.

DOES EVERYONE QUALIFY?

  • No, the seller must demonstrate a hardship.
  • Owner must occupy the residence, in some programs.
  • Most lenders will consider a traditional short sale on a non-owner occupied home.
  • The seller must be qualified by the bank in order to have a short sale.
  • 2nd mortgages and other mortgage liens must be participants in the process.

WHAT ABOUT DEFICIENCY?

  • Lenders are frequently asking for cash contributions from the seller to close and/or promissory notes to the bank(s).
  • These can be waived in most instances, if you can establish a hardship exists.
  • You will receive a 1099 for the deficiency, owing taxes on the sale.
  • This tax bill will be forgiven by the government, through sales closing by December 31, 2012.
  • Most banks are forgiving the deficiency once the sale has closed.

WHAT INFORMATION/DOCUMENTATION IS REQUIRED?

  • Financial documentation is standard with all lenders.
  • You will need to present your last 2 years tax return.
  • You will need to present your last 2 bank statements.
  • You will need to present your last 2 paystubs.
  • You will need to put together a financial statement. Most banks will have this online to fill out.
  • You will need to create a hardship letter to present to the bank, as to the reason why you have found yourself in a short sale situation.
  • You will need to give ‘third party authorization’ to your real estate agent so she/he may communicate with your bank, and to present an offer for the sale of your home.
  • You will need a real estate agent for a short sale. The bank will not trust a FSBO seller with market pricing and effective marketing of the home.

IS THE SELLER REQUIRED TO BE LATE ON PAYMENTS?

  • Generally, YES, unless you can demonstrate default is likely soon.
  • Lack of default by seller, greatly increases the likelihood the bank will request seller contribution to close.

WHAT IS MY LOAN IS FHA?

  • FHA must be involved early on. The seller will need to get a ATP.
  • An ATP is an Approval to Participate.
  • This ATP will stipulate to the real estate agent listing the home the listing price, acceptable terms, amount of relocation funds to seller, and that the deficiency be waived.
  • If buyer is also FHA, then FHA will assist with 1% in closing costs.
  • If buyer is conventional, FHA will not assist with any closing costs.

WHAT IS HAFA?

  • Requires the lender to waive the deficiency.
  • Provides relocation funds to the seller.
  • Must be mortgage originated prior to 1/1/09.
  • Principal balance is limited to $729,750.
  • Monthly mortgage payments must be greater than 31% of gross monthly income.
  • HAFA is lender optional, but most banks will participate.

WHAT ABOUT TRADITIONAL/COOPERATIVE SHORT SALES?

  • Some cooperative/traditional short sales waive the deficiencies and provide relocation funds, all depending on the negotiation process.
  • Generally there is no limit to principal balance of loan.
  • Relocation funds range from $1,500-$3,000 depending on the lender.

WHILE MY HOME IS LISTED AS SHORT SALE?

  • Know you are selling ‘as is.’
  • Keep the utilities on.
  • Understand this is a long process taking from 2-8 months once the lender has the offer from your real estate agent. There is nothing your real estate agent can do to make the bank move any faster.
  • Stay cooperative with all the parties involved and respond to requests quickly.

CREDIT AND TAX CONSEQUENCES?

  • Credit consequences typically much less than the defaults for foreclosure.
  • 7 years before a home purchase with a foreclosure.
  • 2-3 years for a home purchase with a short sale.
  • 1099 will be issued for deficiency- this tax is waived through closings occurring before January 1, 2013. This is for the first mortgage only, and must be primary residence – occupied with utilities on. There is an IRS form for this tax relief.
  • Seller should consult their accountant, CPA, tax attorney, or tax preparer for advice.

TITLE ISSUES THAT MAY ARRISE

  • Seller is generally in financial distress, so other liens may be found on the property, such as: tax liens, child support liens, mechanics liens, HOA leins.
  • There may be monetary judgments attached to the property.
  • Ex (or soon to be ex) spouses may present property problems. Best to have ex-spouse to sign a quit claim deed for the home.
  • Make sure the legal description for the home is listed fully in the divorce decree for the title company.

WHEN DOES THE HOME GO INTO FORECLOSURE?

  • The bank decides the timeline for foreclosure.
  • The bank must file with the county court house and go before a judge to get a legal deficiency against the home owner.
  • This generally takes 60-120 days.
  • Then the home is put up for sale on the court house steps.
  • Most the time, the bank holding the note buys back the home with the paperwork they already hold. Sometimes another buyer will come in to buy the home.
  • After the Sheriff’s sale, according to Kansas Law, the borrower has 3-12 months, it varies with judgments, to exercise their ‘redemptive rights.’ In this time frame the borrower has time to get money together to pay in full the balance of the judgment to the bank.
  • This whole time, the borrower must live at the home for redemptive rights to be in utilized.
  • At the end of the redemption period, if borrower has not paid the balance in full, the borrower must leave the property.

QUESTIONS?

KARIE PARSONS

913-568-3253

E-Mail Karie

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