THE ULTIMATE GUIDE TO
selling your home
as a Short Sale
BY LANA SIMS
THIS BOOK HAS HELPED HUNDREDS OF PEOPLE AVOID FORECLOSURE AND MAKE A “FRESH START” IN LIFE. THERE IS NO DOUBT THAT FACING FORECLOSURE IS A FRIGHTENING EXPERIENCE. YOU MAY BE FEELING FRUSTRATED AND CONFUSED RIGHT NOW. THIS BOOK WILL HELP GET YOUR QUESTIONS ANSWERED.
THE LEGAL STUFF
Copyright
This guide is meant to provide a few helpful tips as you begin the process of selling your home as a Short Sale. The process of a Short Sale may vary depending on your lender. It is not intended as legal advice and you should always consult your attorney before making any legal binding decisions.
© 2024 Lana Sims, Inked Real Estate. All rights reserved. No part of this material may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the copyright owner. For permission requests, write to Lana at the address below:
Lana Sims
Inked Real Estate
200 River Pointe Dr #115
Conroe, TX 77304
Email: lana@inkedrealestate.com Phone: (832) 662-4170
Website: www.livinginnorthhouston.com
HELLO I’AM
Lana Sims
As a seasoned real estate professional with over a decade of experience in Short Sales, I understand the profound emotional and financial impact foreclosure can have on homeowners. My mission is to offer expert guidance and support to navigate these challenging times, helping homeowners avoid foreclosure and find a fresh start with renewed hope for the future.
My approach is always client-centered, prioritizing each client’s unique needs and goals. I work tirelessly to provide personalized support tailored to every individual situation. Whether clients are struggling to keep their home or seeking opportunities in distressed properties, I am committed to guiding them through every step of the process. My extensive experience in negotiation and deep understanding of the Short Sale process enable me to secure the best possible outcomes for my clients.
I am a strong advocate of the BlueSales method and am thrilled to bring this effective approach to North Houston. By collaborating with professionals like you, we can offer comprehensive support to clients facing financial hardships. Together, we can navigate the complexities of Short Sales, providing a clear path to financial recovery and peace of mind. Let’s join forces to make a meaningful difference in the lives of those we serve.
EXPERTISE IN SHORT SALES:
As a dedicated Short Sale expert, I understand the unique challenges that homeowners facing financial hardship encounter.
CLIENT-CENTERED APPROACH:
I believe in putting my clients’ needs first and foremost. Whether you’re a homeowner struggling to avoid foreclosure or an investor seeking opportunities in distressed properties, I am committed to providing personalized support and guidance tailored to your specific goals and circumstances. My goal is not just to close transactions but to empower my clients to make informed decisions that lead to successful outcomes.
NEGOTIATION MASTERY:
Negotiation is at the heart of what I do. I leverage my expertise and strategic approach to advocate fiercely on behalf of my clients, securing the best possible terms and outcomes in every negotiation. Whether it’s dealing with lenders, buyers, or other parties involved in the transaction, I am relentless in pursuit of favorable results for those I represent.
The Stats
Navigating the real estate market in North Houston can be challenging, especially with the dynamic nature of foreclosure properties. In recent years, the foreclosure landscape has seen significant activity, impacting both buyers and sellers. Understanding these trends is crucial for making informed decisions. Whether you’re considering purchasing a foreclosure property or are a homeowner facing potential foreclosure, having the right information is key to navigating this complex market.
North Houston has seen a notable number of foreclosure properties changing hands, with many being sold at auctions. This presents both opportunities and challenges for potential buyers. Knowing the local statistics can give you a better understanding of the market dynamics and help you strategize effectively.
DISTRESSED PROPERTIES SOLD
DISTRESSED PROPERTIES LISTED
DISTRESSED PROPERTIES SOLD AT AUCTION MONTHLY
At Inked Real Estate, we understand the intricacies of the foreclosure market and are dedicated to helping our clients navigate these challenging waters. As experts in short sales, we offer the guidance and support needed to explore all available options, ensuring that our clients make the best decisions for their financial future. Let us help you ink your next deal with confidence and expertise.
G E T T I N G S T A R T E D
IDENTIFICATION
Are you behind on your mortgage payments? Maybe you aren’t behind yet but anticipating the future and trying to plan accordingly?
When you fall behind on your mortgage payments and the value of your property is less than the balance owed, a Short Sale may be an option for you. With a Short Sale, you would sell your property for a discounted price acceptable to your lender.
Once the sale is complete, your lender will remove the existing mortgage. It is up to your lender to accept a Short Sale Offer on your property. That means just because your property is listed as a Short Sale doesn’t mean it will end up being accepted. There are no guarantees and ultimately in the end up to your lender.
Many may ask why is it best to participate in a Short Sale and not just let the property go into Foreclosure? That is a great question! Some main goals of a Short Sale include:
- AVOID FORECLOSURE ON YOUR CREDIT REPORT
- MOVE OUT ON YOUR TIME VS. THE YOUR LENDERS TIME
- POSSIBLY QUALIFY FOR RELOCATION ASSISTANCE
- GET MORE TIME IN YOUR PROPERTY
- WAIVE THE DEFICIENCY
G E T T I N G S T A R T E D
CRITERIA
In order to be considered for a Short Sale, you need to demonstrate financial hardship. For example: divorce, job loss, health issues, etc. Typically, you will need to submit financial documentation including a hardship letter. Depending on your lender and what type of mortgage you have, your lender may or may not want you to go more in-depth regarding your financial hardship.
In addition to the financial hardship, the value of your home must be less than the amount owed. A Short Sale Expert should be able to determine the value of your home and whether or not it would be a Short Sale. If you are months or years behind, more than likely, it would be a Short Sale. However, if you are only a month or two or few months behind, it is possible you may still be able to sell as a Traditional Sale. If this is the case, you should pull out the equity and sell your home now.
If your property taxes are not escrowed into your mortgage and you are not current on your property taxes, be sure to disclose this information to your Real Estate Agent. Although your Real Estate Agent should be asking these types of questions. If not, it is a good indicator that they may not specialize in Short Sales. More than likely, your bank would pay for the property taxes at Closing. However, this needs to be known up front so that the amount of the back owed property taxes can be included on the Settlement Statement. And, the reason your lender would pay these at Closing is because if your property went to Foreclosure, they would need to be paid anyway.
Hiring an Expert Short Sale Specialist
LISTING YOUR HOME
HIRING AN EXPERT SHORT SALE SPECIALIST
It is very important to hire a Real Estate Agent who is an expert in Short Sales. A Short Sale is a very complex transaction with a lot of moving parts. If you hire someone who doesn’t know what they are doing, it is going to cause you more stress in the end. Your house may end up going to Foreclosure. Don’t hire a friend! And, you cannot hire someone who is related to you. A Short Sale must be an Arm’s Length Transaction, which means no one in the transaction can be related. That also means that the Buyer and Seller cannot be related in any way. So, selling your property to a family member is not an option.
You need someone on your side with knowledge, expertise, and most importantly experience with Short Sales. A Short Sale Expert would be able to explain the process to you from start to finish, answer any of your questions, and determine if you are a good candidate. They also must be very patient as Short Sale doesn’t mean “short” time frame. Depending on who your lender is, who the end Investor is, and how many mortgages and potential other liens you may have on the title of your property, it could take weeks or months to complete the entire Short Sale.
When hiring an Expert Short Sale Specialist, don’t be afraid to ask questions. You want to make sure you are hiring someone who is going to stick with the Short Sale and the lengthy process it entails. Some good questions to ask include:
- HOW MANY Short SaleS HAVE YOU CLOSED IN THE PAST YEAR? LIST
- CAN YOU SHOW US THE Short SaleS YOU HAVE CLOSED?
- DO YOU HAVE A TEAM THAT HELPS?
- HOW MANY Short SaleS DO YOU HAVE LISTED RIGHT NOW?
- CAN YOU OR SOMEONE ON YOUR TEAM HELP US FIND A RENTAL WHEN THE TIME COMES?
These are only a few good questions. Most importantly, you need to determine that this person truly is a Short Sale Expert. If not, move on! Be sure to use Google to find more information about the Real Estate Agent if they do handle a lot of Short Sales, you will find it on the Internet as well as testimonials.
HIRING AN EXPERT
SHORT SALE SPECIALIST
LISTING YOUR HOME
After you hire a Short Sale Expert, you will list your home! Your Real Estate Agent will explain the paperwork involved, get more details about your property as well as information on your lender including name and loan number. The name and loan number of your lender is crucial because you will sign an Authorization to Release Information allowing your Short Sale Specialist to speak on your behalf with your lender. You want them to handle everything from start to finish. You should not have to speak to your lender at all.
Once the property is officially listed, it is important to cooperate with all showings. Sometimes your lender will ask to see how many showings have taken place and if they were confirmed or declined. Communication is key throughout the Short Sale process. So, if for some reason a showing doesn’t work, reach out to your Real Estate Agent instead of just declining the showing request. Make sure you have informed your Short Sale Specialist of how many hours you need for a showing. If you have an Auction Date on your property already, you should take a showing whenever someone wants to see the property. If you don’t have an Auction Date, you can require a bit more time.
Get a Short Sale Offer
When you list a property as a Short Sale, sometimes it may take days, weeks, or months to receive a Short Sale Offer. That is why it is important to start this process early and not wait the last minute to contact a Short Sale Specialist. Other times, a property may receive multiple offers. If this is the case, your Real Estate Agent will ask for a highest and best offer from all Buyers. Once received, all offers will be discussed and the best one will be executed.
In the end, the final decision is up to your lender. However, because you are still on the title of the property, you will need to sign the contract and be involved throughout the Short Sale process. It is crucial to sign the Short Sale Offer quickly. If you don’t, the Buyer may get antsy and wonder if you are going to cooperate.
Now that you have a Short Sale Offer on your property, you are able to begin the process with your lender. Your Short Sale Specialist will be able to explain the next steps. Depending on your mortgage lender and what type of mortgage you have, it varies.
GATHER DOCUMENTATION
Once you have received a Short Sale Offer on your property, your Short Sale Specialist will be able to provide you a list of required documentation specific to your lender. Typically, your lender will ask for the following documentation, which includes:
- 30 TO 60-DAYS OF PAY STUBS
- 2 TO 3-MONTHS OF BANK STATEMENTS
- LAST 2-YEARS OF TAX RETURNS
- 4506T
- FINANCIAL STATEMENT
- HARDSHIP LETTER
It is important to write a hardship letter that details and includes the circumstances surrounding your financial situation. Depending on your lender and what type of mortgage you have, the list may vary a bit. Some lenders do not require financial documentation. Others require all of it. Every Short Sale is different and because of this, it is another good reason to use a Short Sale Expert.
Be sure to be proactive about getting the documentation to your Real Estate Agent. Time is of the essence. Waiting does you no good. Your Real Estate Agent has to prepare the Short Sale Offer Packet on their end before submitting it to your lender and this does take time. The packet needs to be clean, concise, and everything in order.
BPO/APPRAISAL
Your lender will order a BPO/Appraisal to determine the value of your property. BPO stands for Broker’s Price Opinion. It is a lot like an Appraisal only not as extensive and is performed by a Real Estate Agent. An Appraisal is performed by a licensed Appraiser. Some banks may just order a BPO. Others will just order an Appraisal. Sometimes both are ordered. It varies depending on your lender and what type of mortgage you have.
Once the BPO and/or Appraisal is completed, the BPO Agent and Appraiser will prepare their report and send it off. Typically, it goes through Quality Control before your lender receives the report. Additionally, it can take a week or 2 for the BPO/Appraisal to get back to your lender. Most likely, your lender will not discuss the value of your property with your Real Estate Agent. However, sometimes it is disclosed and sometimes your Real Estate Agent can even obtain the report.
SUBMITTING THE SHORT SALE OFFER PACKET
Once you have compiled all the necessary documentation, your Short Sale Specialist will prepare the Short Sale Offer Packet. Typically, the Short Sale Offer Packet includes:
- AUTHORIZATION TO RELEASE INFORMATION
- LISTING AGREEMENT
- LISTING ADDENDUM
- MLS LISTING SHEET
- MLS LISTING HISTORY
- FINANCIAL STATEMENT
- HARDSHIP LETTER
- PAY STUBS
- BANK STATEMENTS
- TAX RETURNS
- 4506T
- CONTRACT-SALES
- CONTRACT ADDENDUM
- PRE-APPROVAL LETTER OR PROOF OF
- FUNDS MASTER STATEMENT
Again, it varies depending on your lender and what type of mortgage you have on the property. Your Real Estate Agent should be emailing and/or faxing the Short Sale Offer Packet to your lender. It is very important that they call within a couple of days to confirm receipt and determine if anything else is needed.
Lenders tend to be slow so it is also important that your Short Sale Expert stay on top of your lender and call them at least twice per week. And, of course, update all parties so that no one gets antsy and confused about the process.
NEGOTIATIONS
Depending on what the BPO/Appraisal comes back at, your lender may just accept the Short Sale Offer if it meets the Investor guidelines. However, a majority of the time, your lender will present a Counter Offer. When a Counter Offer is presented, this is where negotiations begin on your property.
This is another great reason to hire a Short Sale Specialist who understands negotiating a Short Sale. It can be very different from a Traditional Sale. They may have specific knowledge from past experience with that lender and/or Investor on what the bottom line might be to get the Short Sale done.
Sometimes negotiations can go back and forth a couple of times. Other times, the representative from your lender will give the required net amount needed. If this happens, it will be the job of your Short Sale Expert to understand how to get the final purchase price and make sure the Buyer will accept the Short Sale Offer.
If you have an FHA Mortgage, your Short Sale can be a bit trickier. Once the BPO/Appraisal comes back, it is required that HUD, which is the Investor, net 88% of the appraised value. If this doesn’t happen, there is no deal. Sometimes, depending on where you are at in the Foreclosure process, you can ask for a variance for a lower net, which would be 86% of the appraised value.
NEGOTIATIONS & THE APPROVAL LETTER
When your Short Sale is APPROVED, this is great news!! Patience is key when it comes to a Short Sale. It can take weeks or months to finally obtain the Approval Letter. The Approval Letter will have all the terms, which includes:
- APPROVED PURCHASE PRICE
- APPROVED FEES
- DEADLINE TO CLOSE ON THE Short Sale
- RELOCATION ASSISTANCE, IF APPLICABLE
It is important that your Short Sale Specialist stays on top of that deadline. Sometimes a lender will offer ONE extension. Other lenders will just deny and make you start the Short Sale process over. It is better to NOT ask for an extension and get it closed on or before the deadline per the Approval Letter.
If the Buyer of your property is cash, you can schedule and close sooner. If the Buyer is getting financing, it takes a bit longer. Typically, 30 to 45-days depending on what time of financing the Buyer is obtaining. Depending on your lender, an Approval Letter can be good for 30-days, 45-days. and 60-days. This is something you really cannot negotiate. Lender determines the deadline.
RELOCATION ASSISTANCE
You may or may not qualify for Relocation Assistance. Relocation Assistance is not something your Short Sale Specialist can negotiate. You either qualify or you don’t. Some lenders and end Investors participate in Relocation Assistance and others do not. Typically, if you live in the property and can prove this, more than likely you will get the Relocation Assistance.
It is important that your Short Sale Specialist puts the Relocation Assistance on the Settlement Statement at the beginning of the process, when the Short Sale Offer Packet is submitted. If you don’t ask for it, you may not get it. Normally, the Relocation Assistance is $3,000.
Usually, you won’t know 100% until you get the Approval Letter from your lender. If you do, it will show on the Approval Letter. Relocation Assistance is paid to you at the Closing by the title company. Not before the Closing. Your lender wants to ensure you cooperate with the Short Sale and Close.
CLOSING
You must be out of the property before Closing. It is crucial you come up with a plan a head of time on where you plan to move. If you are not out of the property, you cannot close, which means you could lose out on the Relocation Assistance and your lender may not give you an extension the Approval Letter. Also, the property should be left in broom swept condition.
Typically, 48 to 72-hours before Closing, your Real Estate Agent will submit to your lender the final Settlement Statement, which needs to be approved by your lender prior to Closing. Some lenders ask for this up to a week in advance.
This will be stated in your Approval Letter. The title company WILL NOT let you close without Settlement Statement Approval.
Most of the time, a Seller is not present at Closing. They are able to pre-sign documentation with their attorney. Some on the other hand prefer to be present. But it is not necessary. Closing can be a few hours depending on whether the Buyer is cash or financing. If you are getting Relocation Assistance, it can be picked up after Closing or mailed to you. Be sure to keep the final Settlement Statement for your records.
