Short Sale Information - FOR SELLERS

For a FREE consultation
call: (954)-531-8100

NEW SHORT SALES RULES (MARS) (HAFA)

Real Estate providers need to give sellers of property involved in a short sale certain disclosures. The Federal Trade Commission (FTC) has issued a new rule that might impact real estate practitioners who represent customers involved in short sale transactions. The Mortgage Assistance Relief Services (MARS) rules are designed to stop unfair and deceptive practices.

The new rules impact real estate licensees who help homeowners avoid foreclosure by negotiating or arranging short sales. The rule applies to residential loans, including second homes and rentals.

Generally, with few exceptions, anyone who negotiates, obtains or arranges a short sale on a residential loan in exchange for compensation is considered a MARS provider and must comply with this rule. This rule also applies to real estate licensees who advertise that they provide short sale services and/or who make referrals to other entities handling the short sale negotiation for them . So, be aware of those who will ask for fees and do not give you these disclosures.

A short sale is a specialized field and not all agents who claim they are able to do them will close them. Therefore, most of these sales are taking way too long and at the end either the buyer walks away or property goes into a foreclosure sale. There are so many issues that can come up and derail a short sale approval. Unless you want to litigate a legitimate fraudulent loan, hiring a lawyer for a short sale is of no help as banks respect them as much or less than incompetent agents. Also, lawyers will charge you fees and do no more or no less than a good professional real estate agent will do negotiating a short sale.

Before a notice of default is filed which could lead to a foreclosure there is a step which if done correctly can technically save the home owner a lot of trouble and in some instances even the impact on the credit. This step that you can take before foreclosure is called a 'Short Sale' in the lingo of real estate mortgages. If you cannot meet your obligations and decide to sell your home to avoid foreclosure, the way to handle a 'short sale' depends upon whether or not you have equity in your home. You have equity in your home if there will be enough money to pay off your mortgage in full after all the expenses are paid when you sell. If not, you must then apply for a short payoff at your lender to avoid foreclosure and a bigger damage to your credit. When a property is foreclosed the lender reports it to the credit bureaus and you better believe this is the last thing you want if you ever need to purchase another home again in the future. A 'short sale', on the other hand, is reported as SETTLED DEBT, and is much less harmful to your credit

CAUTION:

Foreclosures show will stay on your record for seven years. Anytime you apply for a new loan or have your credit run, the foreclosure will show up and is usually a required disclosure you must make on most credit and job applications. A short sale is listed as SETTLED DEBT, and is much less harmful to your credit.

CAN YOU QUALIFY FOR A SHORT SALE?

Depends on the lender and how you handle the matter from the very beginning. You'd think banks want to avoid foreclosing on a property at all costs and prefer getting as much of their loan paid back as possible. You bet they do! - A foreclosure, unfortunately for the bank, does not guarantee they will get their money back in full.

Therefore, their loss mitigation policy may allow for a possible 'short pay' arrangement rather than a foreclosure if they see it will benefit them at all. However, banks use sophisticated financial formulas to arrive at the amount they will accept in 'short sale' if all things were done right. Most agents ignore the calculations that take place by the lender to approve or decline a short sale.

IF PROPERTY IS ALREADY IN FORECLOSURE THE BANK MAY STILL APPROVE A SHORT SALE, HOWEVER, TIME IS CRITICAL AND YOU MUST MOVE FAST.

WHEN TO CONTACT BANK TO REQUEST A SHORT SALE?

Assuming you are experiencing financial hardship ( a hardship can be a loss of income, moving, health issues, etc ) and cannot maintain the mortgage payments any longer, you may be a likely candidate for a short sale negotiation with the lender. It is essential that you call us immediately to know what to do as if it is done incorrectly the lender may disqualify you, even at the last minute, and end up in foreclosure after all.

Banks have a strict criteria as for whom they allow the 'short sale' which is based on the review of your hardship situation and other mitigating factors regarding the property value, the market conditions and their rate of return on the debt calculated by their empirical financial formulas. Therefore, it is better to let some one, very experienced in short sales and in dealing with banks, assist you with all the paperwork and the different steps that will give the lender a clear picture why they should wait for you to sell the house and for them to receive a lot less money than to foreclose on your home. Again, a lawyer, (nor a title company third party) is of greater help. Attorneys are only trained for litigation rather than negotiation and lenders are not very fond of them as they are making millions in this market at the expense of banks and home owners!

CAN YOU DO THE SHORT SALE BY YOURSELF? ...BANKS WILL NOT ALLOW SELLERS TO DO SHORT SALE THEMSELVES!

WHO PAYS FOR THE COMMISSION and CLOSING COSTS?

It is included with the contract presented to the bank and paid out of the proceeds to the lender at the closing which in the majority of the cases leaves no money left over for the homeowner. If you were to have any equity in the property but not enough for the closing, the bank accepts to pay for most in not all of the closing costs, including commissions, or asks buyer (sometimes even the seller) to come up with extra funds a closing. This is why lenders want to know what is your financial situation prior to accepting or negotiating a short sale and why your agent doing the short sale needs to anticipate what bank needs under their criteria to approve the short sale.

HOW LONG WILL IT TAKE TO DO A SHORT SALE?

It depends on certain variables such as how many loans are against the property and how late are you with your payments. It also depends on how complete was the package sent to lender and if their pipe line is moving fast or not. It does take a few weeks as you need approval not only from the bank's loss mitigation department but in some cases also the approval of insurer of the loan.

If done right it may take about the same or a bit longer than a regular sale unless there is more than one mortgage against the property or the lender has a serious back log on their desk. Every lender is different and when the investor is Fannie Mae or Freddie Mac you may experience even longer times.

WILL YOU HAVE A TAX OR LEGAL CONCEQUENCE ?

The short sale or forgiveness of debt by the lender may have a tax liability to you, especially if the property is not your primary residence. You need to consult an accountant regarding this matter. Some lenders may reserve the right to pursue a deficiency after a short sale or even after a foreclosure.

CAN ANY REAL ESTATE AGENT HELP ME WITH A SHORT SALE?

The last thing a lender wants is to have to deal with incomplete packages, absurd offers, unqualified buyers, misrepresentation of the owners true hardship and unprofessional Realtors to top it off. The great majority of real estate agents in Florida are relatively new to the business or are part-timers.

Most agents obtained their license in the past 5-7 years when every one and their cat got a real estate license attracted by the easy money. The term 'short sale' was foreign to them and only now they hear it for the first time! Too many are calling themselves experts at short sales. How can they be experts if it is only now that we see the need to do short sales in Florida? You can go to a seminar and hear the basics from some title company or scam artist, however, experience in 'short sales' only comes with, you guessed it, ... 'experience'.

YOUR AGENT NEEDS TO KNOW HOW TO SPEAK TO BANKS IN ORDER TO SHOW THAT THE PROPERTY AND THE YOUR SITUATION JUSTIFY A SHORT SALE PLUS MUST HAVE A CLEAR VISION OF HOW TO HANDLE THE SALE MARKETING TO OBTAIN AN OFFER ON THE PROPERTY THAT WILL MEET LENDER'S DEMANDS.

Call a professional with over 25 yrs in the real estate business. FREE consultation - (954)-531-8100