Short Sale Defined

What is a Short Sale?

A short sale is a negotiation in which the homeowner qualifies and the mortgage company or companies accept less that the full balance of the loan at closing. A relatively new solution to a financial crisis, the short sale has been used successfully in Maryland and in Baltimore as one of the last options before foreclosure. With plummeting property values, this can save many people from foreclosure and even bankruptcy. More and more lenders are willing to consider short sales because they are much less costly than foreclosures.

     

Are You a Candidate For a

Pre-Foreclosure Short Sale?

Are your mortgage troubles keeping you awake? Do you think you may be a candidate for short sale? To be considered for a short sale, you must demonstrate some inability to continue making your mortgage payment. Most lenders will consider allowing a Short Sale if there has been a change in circumstance after the loan was initially obtained which prevents the borrower from making payments.

Here are some guidelines to consider a short sale:

  • Market value of the home has dropped. If you owe more than the home is worth, and many people are in this situation, a short sale is probably the best option.
  • The mortgage is in default status or could be in the near future. When the loan is in default, lenders are very motivated to do something. This is probably not a secret. What you may not know is that they are becoming increasingly receptive to the idea of working out solutions ahead of time. If they can make a determination that the home is headed for default status, they may agree to a short sale even before it's necessary.
  • The seller has a financial hardship. (Loss of Income, Divorce, Medical Emergencies and Bills / Sudden Illness, Job Transfer, Mortgage Rate Reset.)Hardship can be temporary or permanent. The seller must submit a letter of hardship that explains why the seller cannot pay the difference due upon sale, including why the seller has or will stop making the monthly payments.

Lenders will want a Hardship Letter explaining what happened to cause the inability to keep up with mortgage payments. An unsatisfactory reason would be "the market has declined".

If the seller has substantial savings, the lender may ask for a "contribution" to offset some of the loss. Additionally, the lender may ask for a "promissory note" if the borrower shows a good income stream, often at a favorable rate and terms.

  

  YOU ARE ADVISED TO SEEK COUNSEL FROM YOUR LOCAL CPA OR TAX PROFESSIONALS.

 

 "A Second Mortgage Disaster On The Horizon"

Are You Prepare For The Avalanche?

 

Benefits of a Short Sale!

A “Short Sale” is a much better alternative to Foreclosure or a Deed-in-Lieu of Foreclosure, and will do less harm to your credit.

  • A “Foreclosure” will drop credit ratings by 200-300 points and remain on credit reports for seven to ten years. It usually takes 5 years before new mortgages maybe obtained, with 7 year lending restrictions.
  • A “Short Sale,” however, may drop credit by 60-100 points, and 2 years is the common waiting period before new mortgage loans may be procured.
  • A Short Sale may save your future ability to borrow.
  • A "Foreclosure" on your credit will require you to answer certain questions on applications, for new loans or even employment with a "YES, I have had a foreclosure".
  • A “Foreclosure” on your credit report may affect your government clearance and ability to work for the government.

What Does NOT Constitute A Financial Hardship To A Lender

Bad purchase decisions. Blowing your paycheck on a home theater system with surround sound does not qualify as a hardship.
  • Unhappy with the neighbors. Even if every home on your block has turned into pot growing houses, that will not qualify as a hardship.
  • Buying another home. The lender will not care if you have decided the home is no longer suitable for you or your family.
  • Pregnancy. Increasing the size of your family or starting a family is not considered a hardship.
  • Moving into an apartment. If you decide to move out of your home, that is a lifestyle decision and not a very good reason to abandon your home.

 

 CO-OPERATING AGENTS AND POTENTIAL BUYERS

PLEASE READ BEFORE WRITING OFFER

 

 

It is expressly understood by all parties that the seller owes more on the property than the amount of the contract and is unable to bring cash to closing; therefore the sale will require the approval of the lender.

 

Please note that the property will continue to be on the market in contract-kick-out-status (CNTG/KO) until the sellers lender accepts an offer. Only one offer will be submitted to lender for approval.

 

The Following are some potential issues that can affect a short sale:

1. After the lender receives the short sale packet, the lender may require at least 90 business days or more to approve the short sale. After approval, the sale must close within the lender approved time frame, typically 30 calendar days.

 

2. The seller will receive no cash from this transaction. Any funds usually due the seller will be paid to the lender.

 

3. The seller has no additional cash and will be unable to pay for any closing costs, such as the buyer's appraisal or a home warranty. Should the buyer desire a home warranty they are free to purchase one at closing.


4. The seller may be unable to pay for maintaining the property. The property will remain in the current condition through closing; the seller will not be able to make any repairs to the property.

 

5. The seller's broker will split the professional fee 50/50 with the buyer's broker. Please note that since the lender is taking less than what is owed to them in a short sale, the lender in some cases may negotiate a lower professional fee percentage.

 

6. The sellers forgiven or cancelled debt may be taxable income. The seller should discuss this matter with a tax professional and legal counsel. This has no bearing on the buyer.

 

7. In some cases the lender may pursue a deficiency judgment against the seller for any funds not collected at closing. The seller should discuss this matter with a tax professional and legal counsel. This has no bearing on the buyer.

 

All properties are sold AS IS in their present condition. The seller will not make repairs or give any concessions for repairs. Buyers are encouraged to inspect the property prior to writing an offer to purchase. If the buyer conducts inspections during the inspection period and finds unacceptable conditions, the seller will not renegotiate the terms of the contract and will not make repairs. Please inspect or look over property thoroughly BEFORE making an offer. Furthermore, seller will not pay for termite treatment if active termites are found during the inspection period. 

 

                   How To Communicate With Us

We appreciate the opportunity to work with you on selling one of our listings. Many of our listings are pre-foreclosure properties; there are some things that are different about this type of transaction that we want to make you aware of. Please explain these items to your buyer and if you have any questions please call our office.

  • Our office is closed on weekends and government holidays. We do not return calls when the office is closed.
  • E-mail is the best way to reach us. We check our email several times a day. The e-mail address is: emmaniece@MDHomeSource.com. Please include your email address, telephone numbers and fax number in any communication with us so we can respond to you quickly and get information sent to you in a readable manner. We prefer to use e-mail for contracts and related documents. However, if you have a written an offer, do not wait for our office to call you or email you - - send it! We are extremely busy and we can not always take or return your call. If you are scanning and e-mailing your offer, please make sure your scanner is set to Black and White and no larger than 150dpi.
  • The $3,000 earnest deposit must be in the form of a cashiers check or money order and must be hand delivered to our office within 24hrs of our office notifying you that your offer has been accepted.