“Should I consider a short sale for my house?” is a question more and more homeowners are asking today.

Every household across the nation has felt the impact of the economy.  Many hard working dedicated Americans have lost jobs, taken pay-cuts, or accepted reduced work hours, causing increased financial stress at home.  The possibility of facing foreclosure is scary, and navigating the process of a loan modification, short sale, or foreclosure can be difficult and confusing.  The Joe Sciarrone Group can help determine what your options are, and walk you through the process. 

What is a Short Sale?
A short sale by occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.

When lenders accept a short sale, they are accepting to take the loss of the difference between the homes’s selling price and what is currently owed.  For example: If the unpaid balance of a loan is, $150,000 and a property sells for $130,000, under a short sale the lender might accept $130,000 as payment in full and is “shorted” $20,000.  In the past, homeowner’s were taxed on this difference; however a current moratorium avoids taxation. 

If the HAMP legislation cannot provide relief for you through loan modification, a short sale might be right for you.  Recent reports show that between 85% and 97% of all loan modifications are either denied or never see completion.  If bankruptcy or foreclosure options are undesirable because of the amount of damage to your credit score; a short sale may be your answer…

If you’re considering a short sale, or have applied for a loan modification, the following steps will help you though the process:

1.   Contact The Joe Sciarrone Group.  Find out if you’re a candidate for selling your home via the Short Sale process.  We are highly knowledgeable and will help you determine if a short sale is right for you.  Don’t fall for a scam…You should NEVER pay for loan modification help.  (Please refer to the HAMP legislation for more information.)

2.   Contact Your Lender.  Typically you have to talk to someone in the “loss mitigation” department; however it may take several calls before you actually speak to someone who can help you.  Have account numbers ready and be patient.

3.   Submit a Letter of Authorization.  The lender will not disclose any of your information without authorization.  If you’re working with a Realtor, a lawyer, or title company, you will receive better cooperation if the lender has authorization to speak to those parties regarding your loan. 

4.   Preliminary Net Sheet.   This is an estimated closing statement showing the expected sales price, unpaid loan balance, outstanding payments due and late fees, and real estate commissions.  If your net to seller shows money to seller at closing, you do not need to do a short sale. 

5.   Hardship Letter.  This is a letter you provide to your lender explaining how you got into the financial bind you’re currently in.  Typical examples are loss of a job, substantial medical bills, death in the family, etc.   

6.   Proof of Income and Assets.  You must be truthful and disclose any 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 forgiven. They will also want proof of income via recent pay stubs.

7.   Copies of Bank Statements.  Lenders will need these once the process is started.  If they show large transfers or withdrawals, those will need to be explained.  Plan to provide your last 3 months of statements at a minimum.

8.   Comparative Market Analysis.  There are many declining markets based on the current economy.  And this can be part of the reason you cannot sell your home for enough money to pay off your mortgage.  We can provide this information for you, showing comparable active, pending and homes recently sold. 

9.   Purchase Agreement & Listing Agreement.  The lender will require copies of this documentation and must approve the selling price.  We will act on your behalf as the mediator between your lender and the buyer’s agent.  Be prepared for the lender to negotiate.

Please keep in mind your credit score will be affected by a short sale.  On average your score can be reduced approximately 90 points, vs. a foreclosure which is around 150.  

There is not now, nor has there ever been, anything any one person can do to change the facts of life.  Certainly not facts like mortgage interest rates will rise while property values decline, credit card rates will continue to go higher even when you have a good credit history and even the best workers will lose their jobs if their company closes in these uncertain economic times.

If you have any questions, or would like to discuss the option of selling your home as a short sale, please contact the Joe Sciarrone Group!  We’re here to help…