Sacramento Short Sale Information
More banks are guaranteeing ten day approvals on Sacramento short sales, these servicer’s are gearing up for compliance of the new HAFA or Home Affordable Foreclosure Alternatives Program. New HAFA Program (another government foreclosure acronym to remember!)
Through these reforms, the short sale process will be enhanced. Mortgage servicers will have 10 days to accept or reject a short sale request, and after the transaction is complete, it is possible that the borrower could be completely released from debt. Financial incentives will be provided to borrowers selling their home through a short sale and to mortgage-servicing companies completing short sale transactions. The basics of the Home Affordable Foreclosure Alternatives Program financial incentives for completing short sales or a deed-in-lieu of transaction are:
- Borrowers would receive $1,500 from the government in relocation expenses.
- Servicer’s receive $1,000 from the government per transaction.
- Second liens holders can receive up to $3,000 of the sales proceeds for releasing their liens.
- First lien investors can receive $1,000 from the government for signing off on payments to subordinate lien holders.
- Borrowers must be fully released from any further liability.
Short sales are becoming more commonplace, the servicers, banks, secondary investors are all getting systems in place and training staff in order to facilitate a faster proces… however; a short sale in real estate cab still be a very unpleasant transaction. There are tons of horror stories circulating in the real estate market about short sales.
During a short sale transactions, all of these things and many more are possible. It is important to remember, the United States has never been in this situation before. The lending institutions have never had to deal with the extreme number of foreclosures. Until recently the term “short sale” was really only used in the stock market, not in the housing market. Loan modifications were unheard of, there was no such things as a short refinance.
All of this came crashing down on the lending institutions. Most of them have done a fairly decent job of emplementing systems for dealing with all these new alternatives. However, many have not.
There are many ways to lose a home but signing away ownership in a manner that destroys credit, embarrasses the family and strips an owner of dignity is one of the hardest. For owners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or foreclosure proceedings. One of those options is called a “short sale.”
More than half of my sales in Sacramento over the past few years are short sales. That’s how prominent short sales have become.
When lenders agree to do a short sale in real estate, it means the lender is accepting less than the total amount due. Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose; moreover, not all sellers nor all properties qualify for short sales.
If you are considering buying a short sale, there could be drawbacks. For your protection, I suggest that all borrowers:
- Obtain legal advice from a competent real estate lawyer
- Call an accountant to discuss short sale tax ramifications
As a real estate agent, I am not licensed as a lawyer nor a CPA and cannot advise on those consequences. Except for certain conditions pursuant to the Mortgage Forgiveness Debt Relief Act of 2007, be aware the I.R.S. could consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid. In some states, this amount is known as a deficiency. A lawyer can determine whether your loan qualifies for a deficiency judgment or claim.
Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect.
- Call the Lender
You may need to make a half dozen phone calls before you find the person responsible for handling short sales. You do not want to talk to the “real estate short sale” or “work out” department, you want the supervisor’s name, the name of the individual capable of making a decision.
Submit Letter of Authorization
Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan. The letter should include the following:
- Property Address
- Loan Reference Number
- Your Name
- The Date
- Your Agent’s Name & Contact Information
- Hardship Letter
The sadder, the better. This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized or a truck ran over your entire family, but lenders are not particularly empathetic to situations involving dishonesty or criminal behavior.
- Proof of Income and Assets
It is best to be truthful and honest about your financial situation and disclose assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.
- Copies of Bank Statements
If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it’s probably a good idea to explain each of those line items to the lender. In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.
- Comparative Market Analysis
Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a comparative market analysis (CMA). Your real estate agent can prepare a CMA for you, which will show prices of similar homes:
- Active on the market
- Pending sales
- Solds from the past six months.
- Preliminary Net Sheet (This will be provided by your agents title company)
This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any. Your closing agent or lawyer should be able to prepare this for you, if you do not know how to calculate any of these fees. If the bottom line shows cash to the seller, you will probably not need a short sale.
- Purchase Agreement & Listing Agreement
When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to pay for certain items such as home protection plans or termite inspections.
Now, if everything goes well, the lender will approve your short sale. As part of the negotiation, you might ask that the lender not report adverse credit to the credit reporting agencies, but realize that the lender is under no obligation to accommodate this request.
Read more about Before you Buy a Short Sale.
Click Here For Page Two About Short Sales