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What is a Short Sale?

Simply put, a
short sale is a sales transaction in which the seller's mortgage lender agrees to accept a payoff of less than the balance due on the loan.

Unfortunately, the following terms have become common in everyday conversations:

  • "I'm upside down"

  • "my home is underwater"

In both cases, your home is not worth what you currently owe to the bank for your mortgage loan.  There are many reasons why this happened, but the most common is due to the fact that market conditions deteriorated due to a meltdown of the financial markets in late 2008 and real estate values began to fall as unemployment began to soar.  It was (unfortunately) the "perfect storm" and we're still feeling the effects of it today and it will take several years for the overall economy to recover from this one!

The Short Sale Process and YOU
If you happen to be "upside down" or "underwater" on your mortgage and you have, your banks *may* grant a short sale for two reasons: the seller has a hardship and the seller owes more on the mortgage than the home is worth.  The most common hardship examples include:

  • Unemployment / reduced income

  • Divorce

  • Medical emergencies

  • Job transfer that requires you to move out of town

  • Bankruptcy

  • Death (you or a spouse)

As a seller, you will need to prepare a short-sale package for submission to your bank/lender.  Each bank/lender has its own guidelines, but the basic procedures are pretty similar from bank to bank.  A short-sale package will most likely consist of:

  • Letter of Authorization (which allows me or my transaction manager speak to the bank)

  • HUD-1 or Preliminary Net Sheet

  • Completed Financial Statement

  • Seller's Hardship Letter - (this is critical to getting a short-sale approved by your lender)

  • 2 Years of Tax Returns

  • 2 Years of W-2s

  • Recent Payroll Stubs

  • Last 2 Months of Bank Statements

  • Comparative Market Analysis (CMA) with a list of recent comparable sales in your neighborhood

At this point, the process is not unlike a traditional sale - I will work with you to establish a listing price based upon current market conditions and we'll inform other agents (via the MLS) that this is a short sale - pending bank approval.  We solicit an offer, submit it to the bank and and wait for an answer.  It can be several weeks to several months depending how backlogged they are.  We work with an established and credible short-sale transaction management firm (RealtyTMS) who persistently handles all of the communications in a systematic pursuit of a short sale payoff agreement (approval).  As of February 2011, the average short sale approval is running approximately four months.  I can't stress enough that patience is essential for you and the buyer.

Potential Tax Consequences
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence.  Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.  I am not an attorney or CPA so can not give legal or tax advice, so be aware that there may be potential tax consequences, so it’s always best to seek professional guidance in these areas as needed.

Don't be overwhelmed or confused.  Selling your home or condo via short sale is a better
alternative to foreclosure.  Call Anthony Rael - your Denver Short Sale Expert!

 

Thinking of purchasing a short sale property?
I'll be happy to send you lists of short sale and/or bank-owned (foreclosed) properties throughout the Denver metro area.  Call Anthony Rael, Denver Realtor® and Short Sale Expert at (303) 520-3179.

 

The Short Sale Process with the BANK
In most cases, buyers should expect to wait anywhere from 30 days to several months to get a response from the bank.  Our transaction management partner (RealtyTMS) will communicate WEEKLY with the bank and keep all parties (seller, listing agent, buyer, buyer's agent) updated on the process.  Some buyers get tired of waiting for short sale approval and may threaten to cancel if they don't get an answer within a specified time period. Unfortunately, there's nothing ANYONE can do.  If you're easily frustrated or very inpatient, pursuing a short sale is probably not a good idea for you

My short sale services are backed by a 100% satisfaction guarantee For expert real estate advice & counseling, contact Anthony Rael, Denver REALTOR® with REMAX Alliance at (303) 520-3179. You can also follow Anthony Rael on Facebook!

by Anthony Rael on Google+

 

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The content relating to real estate for sale in this Web site comes in part from the Internet Data eXchange ("IDX") program of METROLIST, INC. Real estate listings held by brokers other than REMAX Alliance, ReMax Alliance or RE/MAX are marked with the IDX Logo. This information is being provided for the consumers' personal, non-commercial use and may not be used for any other purpose. All information subject to change and should be independently verified. The data relating to real estate for sale in this web site comes in part from the Internet Data eXchange ("IDX") program of METROLIST, INC. Listings held by brokers or brokerage firms or other realty firms other than REMAX, RE/MAX or REMAX ALLIANCE are marked with the IDX logo.  All data in this web site is deemed reliable but is not guaranteed.  All information subject to change and should be independently verified.

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Anthony "Mike" Rael  |  REMAX Alliance - Arvada  |  5440 Ward Rd., #110  |  Arvada, Colorado 80002  |  303.520.3179
Licensed Colorado Real Estate Agent  |  Certified Negotiation Expert (CNE)  |  Seniors Real Estate Specialist (SRES)

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