What is a short sale?
This is when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers.
Who is a good candidate for a short sale?
- You have very little to negative equity in the home
- You have a financial hardship that has caused you not to be able to make your mortgage payment
- You owe more on your home than it's worth
- The Mortgage is in or Near Default Status
- If comparable homes in your area and specific zip code have sold for less than your mortgage balance
Short Sale vs Foreclosure – Which is the better option? Click here for more details
Of all available options, foreclosure is the worst. The inevitable result of a foreclosure is the lender taking your house. Not only will you lose your house, but the lender can get a judgment against you for the arrearages you owe plus his costs for the foreclosure action. If that isn’t enough, your credit report will be in terminal condition for many years to come, worsening an already bad financial situation and making it very difficult to obtain any other kind of credit. There is no upside to foreclosure. It should be avoided at all costs.
What are the disadvantages to a short sale?
While a short sale will save you from foreclosure, it will also have a negative effect on your credit score, frequently lowering it by as much as 200 points. This can be overcome more quickly than the black mark of a foreclosure, especially if you manage to retain one or two credit cards and keep them current. Perhaps equally distressing, the Internal Revenue Service frequently deemed the difference between the mortgage balance and the amount realized from the short sale to be taxable as income despite the fact that the debtor never saw a dime of it. There is new federal legislation called the Mortgage Forgiveness Debt Relief Act 0f 2007 that just went into effect on January 1st, 2008. The new act essentially eliminates this problem.
Why www.ShortSalers.com for your Short Sale?
Don’t do this alone. An experienced agent makes all the difference. We know who to talk to, when to talk to the seller, and how to handle all the paperwork to get the deal done. Other agents do this in passing and is not their “main” business. It is our main business and we do it every day. With us, we are Certified Distressed Property Experts.
What documentation do I need for a short sale?
Tax Returns (Last 2 Years, First 3 pages)
As you may know, every year before april 15th your taxes need to be filed with the IRS. You are taxed by the IRS based on your income and expenses every year. Your TAX RETURN is a summary of your taxes. The first 3 pages of your taxes are your tax returns.
W-2’s (Last 2 Years) If you are an employee (earning a salary from someone), you must receive a form called a W-2 from your employer. The W-2 shows the wages that were paid to you by your employer and the taxes that were withheld from your checks.
Pay Stubs (2 Most Recent)
A Pay Stub is the receipt from your paycheck. Whether you use a direct deposit or you are given a check directly, your employer will also give you copy/receipt of the payment that was given to you. We will need this copy from your 2 most recent paychecks. Wether you are paid weekly, biweekly or monthly, we will still need your 2 most recent pay stubs.
Bank Statements (2 Most Recent Months)
A Bank Statement is a report of your monthly activity from a checking or savings account. This will show money you deposit into the account and money you withdraw. Your Mortgage Company requires your 2 most recents months of bank statements.
Lender Statement/Mortgage Statement
This is the document that your Mortgage Company sends to you every month stating how much you must pay this month on your mortgage. This document also contains your Loan number/Account number and Loan Balance. The Mortgage Lender’s contact information will also be on this document.
The Financial Statement is a summary of all income and expenses going into and out of your house. This will include your salary, how much you spend on food, gas, bills, etc. The lender may want you to fill out their individual form later on as well.
Authorization to Release Information
This one page form will allow me to speak to your lender. This form simply states that you are giving me authorization to speak with your lender. Without this form, I am not able to speak on your behalf. Your signature and Social Security number are required by every lender to allow this authorization. If you have multiple mortgages please print 2 of these and fill out a separate one for each mortgage company.
You will need to write a Hardship Letter which is a letter written from you to the bank. This is your chance to explain your situation to the bank of how you came into your current situation. A good, solid hardship letter can help make the difference if your file is marginal on the approval. Spend some quality time drafting this letter with the facts of surrounding your situation.