What is a Short Sale?

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. "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.

Short Sales: The Positives

While homeowner’s are forbidden from receiving any proceeds from the sale of their home, there are other benefits to “short sales”.

1. A “short sale” if the homeowner cannot afford to remain in premises, the lender will repossess the property through foreclosure proceedings. A “short sale” can save the homeowner many months of stress, aggravation, embarrassment and uncertainty.

2. A foreclosure can be devastating upon the credit of a defaulting homeowner. With “short sales”, the homeowner’s credit may be restored in as little as eighteen months.

Short Sales: What you can expect

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:

Hardship Letter: 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, etc.

Proof of Income and 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.

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.

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

How we can help

At the Venta de Casas en Chicago, we have experience in negotiating “short sales” with numerous lending institutions. If you are considering a “short sale”, please Contact Us without delay as earlier communications with your lender increase the likelihood of a successful negotiation.

More General info About Short Sales

A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.

In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank's loss mitigation or workout department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower's financial situation.

A short sale typically is executed to prevent a home foreclosure, but the decision to proceed with a short sale is predicated on the most economic way for the bank to recover the amount owed on the property. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing as there are carrying costs that are associated with a foreclosure. A bank will typically determine the amount of equity (or lack of), by determining the probable selling price from a Broker Price Opinion BPO (also known as a Broker Opinion of Value (BOV)) or through a valuation of an appraisal. For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure. In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.

Short sales are common in standard business transactions in recognition that creditors are not doing debtors a favor but, rather, engaging in a business transaction when extending credit. When it makes no business sense or is economically not feasible to retain an asset, businesses default on their loans (called bonds). It is not uncommon for business bonds to trade on the after-market for a small fraction of their face value in realization of the likelihood of these future defaults.

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Negotiations
Lenders have a department (typically called "loss mitigation") that processes potential short sale transactions. Today, lenders may accept short sale offers or requests for short sales even if a Notice of Default has not been issued or recorded with the locality where the property is located. Given the unprecedented and overwhelming number of losses that mortgage lenders have suffered from the 2009 foreclosure crisis, they are now more willing to accept short sales than ever before. This is great news for borrowers who are "under-water" or in other words those who owe more on their mortgage than their property is worth and are having trouble selling to avoid foreclosure because of this.

Lenders have a varying tolerance for short sales and mitigated losses. The majority of lenders have a pre-determined criteria for such transactions. Other distressed lenders may allow any reasonable offer subject to a loss mitigator's approval. Multiple levels of approvals and conditions are very common with short sales. Junior liens - such as second mortgages, HELOC lenders, and HOA (special assessment liens) - may need to approve the short sale. Frequent objectors to short sales include tax lien holders (income, estate or corporate franchise tax - as opposed to real property taxes, which have priority even when unrecorded) and mechanic's lien holders. It is possible for junior lien holders to prevent the short sale. If the lender required mortgage insurance on the loan, the insurer will likely also be party to negotiations as they may be asked to pay out a claim to offset the lender's loss in the short sale. The wide array of parties, parameters and processes involved in a short sale makes it a relatively complex and highly specialized type of real estate transaction which is why unfortunately short sale deals have a high failure rate and often do not close on time to save homeowners from foreclosure when they are not handled by a knowledgeable and experienced professional. The best sources of knowledge and expertise in short sales are short sale negotiators, loss mitigation specialists, and real estate lawyers who specialize in short sale.

One thing a buyer should know about a short sale is there is no necessary commitment by the bank to sell the house. When the bank completes a short sale they have to write off the difference between their loan amount and the lesser proceeds from the escrow, something they wish to avoid. You may go through all the paperwork to make an offer on the house, pay for inspections, and put down a deposit to start the sale process. After you have made your offer, the bank may try to convince the seller to refinance their loan and stay in the house, which avoids the bank having to take the write off. Any short sale contract includes a contingency where the bank must approve the sale. If the bank persuades the seller to refinance the house, the bank doesn't approve the short sale and the buyer gets their deposit back. In this situation the bank has tied up several months of the buyers time and now the buyer must start the buying process over again. So if you have a fixed time period to get in a specific city or neighborhood you may be better off with a foreclosure (the bank formally took possession of the property) or a situation where the seller has equity. So in a short sale situation look for clues like has the seller moved out (revealed they have no intention of staying in the property) and/or grill the selling realtor about how much the selling bank has agreed to sell the house at (the price you want to offer).

Short Sale NEWS

Don't foreclose! Do a short sale

NEW YORK (CNN Money) -- Short sales are the hottest thing going in the distressed-property market, and the trend is expected to get even hotter in coming weeks, when the government starts handing out cash to encourage lenders to close these deals.

"Banks have ramped up short sale approvals," said Duane Legate of House Buyer Network, which connects short sellers with buyers. "They're hiring a lot of the people who once worked in the mortgage-lending industry and moved them over to short sales."

These transactions, where lenders allow homeowners to sell their houses for less than they owe, accounted for 17% of all residential real estate sales in February, up from nearly 13% in November, according to a monthly real estate market survey by Campbell/Inside Mortgage Finance.

And Bank of America (BACFortune 500) the country's largest mortgage servicer, has more than doubled the number of short sales it processed in recent months.

Elizabeth Weintraub, a Sacramento, Calif.-area real estate agent who handles many short sales, was amazed at how quickly a recent deal went through. "Bank of America approved it in 24 days," she said. "That flipped me out."

This is a huge change from even just six months ago when the short-sale market was stalled and most people would describe the process has real estate hell. Because lenders stand to lose so much on these transactions, they have been reluctant to make short sales happen, often waiting months before getting back to potential buyers.

Beware: You lost your house but still have to pay

"In the past, many short sales would never come to fruition and the ones that did averaged over half a year to complete," said Chris Saitta, CEO of Equator, which produces short sale software.

"Things would just fall into a black hole and not come out again," added Weintraub.

And even when banks did agree to the sale, the process could be further complicated if the original owner had a second mortgage.

In most cases, the first lender is repaid in full before any money flows to a second-lein holder. And because most distressed borrowers are severely underwater, there's usually nothing left to send on. As a result, second-lein holders are left holding the bag and have been killing many deals.

But that has been changing. For one thing, banks realize that they make out far better financially with a short sale than a foreclosure. "The lenders lose 50% on a foreclosure and only 30% on a short sale," said Glenn Kelman, founder of the real estate Web site Redfin. "And short sales offer a way to get distressed properties off their books quickly."

And on April 5, lenders and mortgage investors will have even more incentives to offer troubled borrowers short sales instead of foreclosing.

Under the new Home Affordable Foreclosure Alternatives program, borrowers will earn a $3,000 "relocation incentive" and servicers will get $1,500 for handling a short sale.

The investors who actually own the mortgage notes will get $2,000 in exchange for sharing proceeds of the short sales with any second-lien holders. And, finally, those second lien holders will receive up to $6,000 for releasing their claims.

Lenders participating in the program must also determine the market values of properties early on and inform the owners of just what price they're willing to accept. Then, if owners come back to the lenders with bonafide offers, they have to be accepted within 10 days.

Equator's Saiita anticipates a short sale explosion in response to the new program. "The challenge will be handling all the volume," he said.

The company has already tweaked its software, which 58 servicers use, to handle the new HAFA rules. And that should help reduce the time it takes to execute a sale, which currently averages 88 days.

The boom in short sales may accelerate the end to the foreclosure crisis by cleaning out the overhang of borrowers in distress and replacing them with more stable homeowners.

Plus, these sales are better for distressed borrowers because their credit scores suffer less. Going through a foreclosure can knock 200 points off a FICO score, twice as much as the penalty for a short sale.

What is a Short Sale? Basic...or foreclosure proceedings for homeowners/borrowers who can no longer afford to keep mortgage payments current. One of those options is called a "short sale." Sometimes, to avoid going through the costs of foreclosure, a lender will sanction a short sale by allowing a homeowner to sell (allowing a buyer to purchase) the home for less than the mortgage balance while the home is in pre-foreclosure stage. The Home's Market Value Has DroppedThe Mortgage is in or Near Default StatusThe Homeowner Has Fallen on Hard Times. The homeowner must submit a letter of hardship that explains why they can not pay the difference due upon sale, including why the homeowner has or will stop making the monthly payments. . It used to be that lenders would not consider a short sale if the payments were current, but in many cases, lenders realize that other factors contribute to a potential default making them eager to head off future problems. . Comparable sales must substantiate that the home is worth less than the unpaid balance due the lender. This unpaid balance may include a prepayment penalty.

A short sale is the process by which a homeowner can sell a house for less money than actually owed on the mortgage(s).

There are alternatives to bankruptcy

Sample steps of a short sale:

Seller signs a listing agreement with a real estate agent subject to selling as a short sale with third-party approval.
The owner, or if the owner has an agent, finds a buyer who makes an offer for less than the amount of the mortgage.
Seller accepts the buyer's purchase offer subject to the lender’s approval.
Seller's lender accepts the buyer's purchase offer.
Transaction closes when the buyer delivers the funds, the lender releases the lien and the seller delivers the deed.

The decline in market value of a property below the total debt owed on that property does not automatically qualify a homeowner for a short sale. Banks take several factors into consideration when determining if it will allow for a short sale to occur.

Qualifications for a Short Sale in Chicago and USA

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Examples of hardship are:

Unemployment
Divorce
Medical emergency/sudden illness
Bankruptcy
Death
Other unforeseen circumstances that caused financial hardship

The Homeowner Has No Assets. The lender will probably want to see a copy of the owner’s tax returns and/or a financial statement. If the lender discovers assets, the lender may not grant the short sale because the lender will feel that the homeowner has the ability to pay the shorted difference. Homeowners with assets may still be granted a short sale but could be required to pay back the shortfall.

Short Sale Consequences

A short sale is dependent on a buyer making an offer to purchase. If you do not receive an offer, you will not qualify for a short sale. So even if you meet all the other criteria, it is possible that no one will buy the short sale. It is also dependent on the lender accepting the buyer's offer. If the lender rejects the offer, a short sale will not take place.

Tax Consequences. If the lender agrees to the short sale, the lender may possess the right to issue you a 1099 for the shorted difference, due to a provision in the IRS code about debt forgiveness. Many situations are exempt from debt forgiveness, according to the Mortgage Forgiveness Debt Relief Act of 2007.

You should speak to a real estate lawyer and a tax accountant to determine the amount of short sale tax consequences, and whether you can afford to pay those taxes, if any.

Blemished Credit Report. A short sale will show up on your credit report. It's a pre-foreclosure that has been redeemed. Short sales affect credit ratings. While the damage to your credit report may not seem as bad as a foreclosure to you, creditors may not make the distinction.

Always seek legal counsel before attempting to pursue a short sale. A real estate agent cannot give you legal advice.

2010 Chicago Short sale news

SHORT sales — in which mortgage lenders agree to accept less than what is owed, allowing borrowers to escape foreclosure — were expected to grow easier this year after the Treasury Department proposed industry guidelines to navigate these complex transactions.

But that has not yet happened, industry experts say, largely because lenders and investors who hold the liens on second mortgages and home equity credit lines often fight for a larger piece of the short sale proceeds.

In late October, the Treasury Department officially adopted the guidelines, first proposed in April, which include suggestions for how these second-lien holders might be paid in such situations. Lenders and short sale specialists say the new measures could help when they go into effect in April 2010, simply because they offer some structure to a process that has often been chaotic.

Until then, lenders and foreclosure counselors say, homeowners can continue to expect a painfully slow process that sometimes fails, and can ultimately lead them back to foreclosure.

“It’s been tough sledding,” said David Sunlin, Bank of America’s real estate management executive. “We’ve been wanting to improve the short sale process, but our focus this year has been on retention efforts,” he said, referring to loan modifications and other foreclosure-avoidance initiatives.

Mr. Sunlin says that more borrowers are seeking short sales this year than in years past, thereby further straining the bank’s ability to handle them in a timely manner. He declined to provide specific numbers.

Real estate lawyers and mortgage industry executives say it can take as long as nine months to complete a short sale.

Lenders say they prefer loan modifications but will accept short sales because they lose less money on such transactions than they do in foreclosures, which often require them to carry the house for months before selling it.

Short sales still show up on a borrower’s credit history, but lenders are generally willing to offer them a new mortgage two years later, according to Mr. Sunlin. After foreclosures, borrowers typically must wait at least five years before a bank is willing to grant them mortgages, he said.

The Treasury guidelines focus on a range of elements in the short sale process. They suggest, for instance, that lenders offer second-lien holders up to $3,000 of the short sale proceeds, with Treasury reimbursing lenders up to $1,000 for doing so.

Under the guidelines, homeowners who are considering a short sale are encouraged to speak with their lenders early in the process about an acceptable sales price for the house, rather than simply contacting a lender when a buyer has made an offer.

And owners who complete a short sale will receive $1,500 from the federal government for relocation costs.

Travis Hamel Olsen, the chief operating officer for the Loan Resolution Corporation in Scottsdale, Ariz., which represents servicers and investors in short sale negotiations, said the Treasury Department’s incentives would do little to encourage second-lien holders to agree to a short sale. Many delinquent borrowers have second liens, mortgage industry executives say.

Chicago short Sale venta corta , quiere decir que el banco aceptaria mucho menos que lo que debe a su principal , por ejemplo , una venta corta consite en vender su casa en el actual precio de que su casa esta valorada no en el precio que usted le debe al banco .

Esto seria una venta corta llamada short sale en Ingles que a todos le puede beneficiar y es gratis .

Si piensa que puede estar en el caso de una venta corta no dude en llamarnos somo experto en venta de casas cortas

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