"We can not save every home but we can give the homeowner a fighting chance"

WHAT IS A SHORT SALE & DO I QUALIFY?

The definition of a property eligible for a short sale is when a homeowner owes an amount on his property that when combined with closing costs and commission is higher than current market value.

The definition of a homeowner that is eligible for a short sale is someone who has a material change in a financial situation that is or will affect their ability to pay their mortgage. A homeowner has to show acceptable financial hardship. Examples of an acceptable hardship are:

1.       Loss of Job                                                      10.   Medical Bills

2.       Business Failure                                             11.   Military Service

3.       Damage to Property                                       12.   Payment Increase or Mortgage Adjustment

4.       Death of a Spouse                                          13.   Too Much Debt to Income    

5.       Death of Family Members                              14.   Insurance or Tax Increase

6.       Severe Illness                                                  15.   Income

7.       Inheritance                                                      16.   Separation  

8.       Divorce                                                            17.   Incarceration

9.       Mandatory Job Relocation                          

A homeowner MUST prove a financial hardship to the bank in order to be considered for a Short Sale. Proof of this hardship is not difficult to provide if it is accurate. A short sale is a way to avoid foreclosure and not a “get out of my mortgage free card”. A homeowner without a financial hardship that is upside down on the mortgage and wants to sell is not a potential short sale, but is only a dissatisfied homeowner.  A foreclosure has far reaching and regulatory consequences that most people are not aware of. Please see the chart below regarding Short Sale vs. Foreclosure.

A short sale occurs when a negotiation is entered into with the homeowner’s mortgage company or companies to accept less than the full balance of the loan at closing. A buyer closes on the property and the property is “sold short”.

If you meet the above qualifications the next steps are as followed:

1.       Find a Realtor experienced in short sales and hire a Realtor only with short sale experience. Only YOU AND YOUR REALTOR can do the following. If you are in Arizona we can help you. If you are in another state, contact us, and we will put you in contact with a qualified CDPE agent (800-515-2134).

2.       Since many banks are requiring your property be listed for at least 60 to 90 days before they will consider a short sale make sure your property goes on the MLS immediately.

3.       Send your bank(s) an authorization that allows your Realtor to speak with them regarding your account. As your Realtors we work closely with you and the Bank to Negotiate on your behalf.

4.       At our first meeting with you, the homeowner, we have a complete detailed package to help you proceed with your bank in a short sale with our professional guidance and representation. Since time is of the essence in a short sale the sooner you start to work with your Realtor the more opportunity of success you will have. The package necessary for the Bank will include:

A)     Hardship Letter

B)      Two Years Tax Returns & W-2’s

C)      Two Most Recent Bank & Retirement Account Statements

D)     Two Most Recent Pay Check Stubs

E)      Current Financial Statement

F)      Any Documents Supporting The Hardship

G)     Financial Worksheet from the Homeowner

H)     Current Market Analysis (CMA) & Market Conditions

I)        Estimated Net Sheet or HUD-1 (We, As Your Realtor, work closely with a CDPE title officer that can provide this).

J)       Listing Agreement

K)      Listing History (MLS details the time on market & price reductions)

L)       Damage & Repair Report – If Any

M)   Damage & Repair Pictures – If Any

N)     Estimated Holding Cost to the Bank if Bank Forecloses.

O)     A Copy of the Executed Sales Contract with Buyers Proof of Funds or LSR

5.       Fax or Express Mail entire package to the Bank’s Short Sale Department or the Loss Mitigation Department.

6.       Upon receipt of the entire package the bank will send an appraiser or Real Estate agent to complete a BPO (Broker Price Opinion) of value.

7.       The Bank will determine at that point if a short sale is in order and if the offer will be accepted or countered.

8.       A Short Sale process is not a quick or easy one but it is worth the effort to avoid a foreclosure.

"We're helping families and individuals one home at a time"

Frequently Asked Questions: Q & A

Why would the Bank allow a Homeowner to complete a short sale and take a loss on a property? This question is one of the most common misconceptions that homeowners and Realtors have regarding short sales. Banks are not lying in wait ready to jump out and take your house. Banks are not in the business to take homes back. Banks are in the finance business only not in the Real Estate business. In fact a foreclosure has far reaching financial and regulatory consequences for banks than most people are not aware of.

How much will my bank sell my home for in a short sale? You still own the property and can be living in the property during this process. You and your Realtor will negotiate the offer(s) that come in and only when you and the buyer have a “meeting of the minds” do we send the offer to the lender. The bank will receive the offer along with the complete package we put together. The bank will review all information in the package. The bank would like for the home to sell at market value, not loan value. (Loan value is probably higher than market value). Our package will prove to the bank what the market value is.   

Can I sell my home if I have two loans, a first and a second? Yes, sometimes. This does complicate the situation but it is worth trying. A second loan on the property does include a Home Equity Line of Credit. We have been able to negotiate with the first and second on properties and have been able to come to an agreement workable by all three parties, bank(s) and homeowner.

Is there a Tax Consequence to doing a Short Sale? Possibly! When completing a Short Sale, possible tax issues can arise for the homeowner. The owner considering a Short Sale should be encouraged to discuss these issues with an attorney or tax accountant/CPA.  In 2007 a bill, “The Mortgage Forgiveness Debt Relief Act of 2007” was overwhelmingly put into place and signed by President Bush. This bill has been extended through 2012 to help homeowners in a short sale/foreclosure situation. The bill permanently eliminates tax on up to $2,000,000.00 of debt for a principal residence. There are a few non-eligible circumstances that would need to be dealt with. Your tax accountant or attorney can be most helpful and guide you through this situation.

Is Arizona a Judge Deficiency State? No, Arizona has never been a Judge Deficiency state. At this present time there is no case law in the court system to suggest Arizona is changing but with our housing market in the shape it is in everyone needs to be aware this could change.   

Is there really a difference between a Short Sale and a Foreclosure? Absolutely! Please see the chart below.

If the Bank accepts my Short Sale is my Foreclosure canceled? Absolutely!

Can I recover credit wise from a Short Sale? Absolutely! More than likely in 12 to 18 months you can purchase a home again.

What do I do next? Great Question! The best thing you can do, at this point, is call “The Vogel’s”. We are a team of agents that specialize in helping people just like you. Time is of the essence so do not delay, call or e-mail us today and we will meet with you immediately.

ISSUES	FORECLOSURE	SUCCESSFUL SHORT SALE
Future Fannie Mae Loan - Primary Residence	A homeowner who loses a home to foreclosure is ineligible for Fannie Mae backed mortgage for a period of 5 years	A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years
Future Fannie Mae Loan -   Non Primary	An investor who allows a property to go to Foreclosure in ineligible for a Fannie Mae backed investment mortgage for a period of 7 years	An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years
Future Loan with any Mortgage Company	On any future 1003 application, a prospective borrower will have no answer YES to a question C in section VII of the standard 1003 that asks "Have you had property closed upon or given title or deed in lieu thereof in the last 7 years?" this will effect future rates.	There is no similar declaration or question regarding a short sale
Credit Score	Score may be lowered anywhere from 250 to over 300 points. Typically will affect score for over 3 years.	Only late payments on mortgage will show and after sale mortgage will be reported as paid or negotiated. This will lower the score as little as 50 points if all other payments are being made. A short sale's affect can be as brief as 12 to 18 months.
Credit History	Foreclosure will remain as public record on the person's credit history for 10 years or more.	Short sale is not reported on a credit history. There is no specific reporting item for "short sale". The loan is typically reported as "paid in full, settled".
Security Clearances	Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor of felony. If a client has a foreclosure and is a police officer, security, or any other position that requires a security clearance in almost all cases clearance will be revoked and position will be terminated.	A short sale on its own does not challenge most security clearances.
Current Employment	Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure in many cases is grounds for immediate reassignment or termination.	A short sale is not reported on a credit report and is therefore not a challenge to employment.
Future Employment	Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment.	A short sale is not reported on a credit report and is therefore not a challenge to employment.
Deficiency Judgment	In 100% of foreclosures (except in those states where there is no deficiency, Arizona for example) the bank has the right to pursue a deficiency judgment.	In some successful short sales it is possible to convince the lender to give up the right to pursuit of a deficiency judgment against the homeowner.
Deficiency Judgment (amount)	In a foreclosure the home will have to go through an REO process if it does not sell at auction. In most cases this will result in a lower sales price and a longer time to sale in a declining market. This will result in a higher possible deficiency judgment.	In a properly managed short sale the home is sold at a price that should be close to market value and in almost all cases will be better than an REO sale resulting in a lower deficiency.