COMSTOCK REALTY GROUP
SHORT SALES
WHAT IS A SHORT SALE?
A Short Sale occurs when the Seller owes more on their mortgage than the current market value of their property. Once the Seller receives an acceptable offer from a ready, willing and able Buyer, negotiations and concessions must be made so that the lender will accept a sale at current market value as payment in full for the loan. Sometimes the homeowner in this situation may have the mortgage debt forgiven.
The need for a Short Sale often begins with a loan default. The lender or creditors may be willing to allow the property to be sold for less than the amount owed on the mortgage and accept that short amount as full payment on the debt.
There often is a tremendous amount of stress involved in these transactions because:
The Seller usually is in default and is unable to make the payments.
The Seller may have received pre-foreclosure notices or is in foreclosure.
There may not be enough time to complete the Short Sale before the foreclosure date.
The Buyer may cancel the sale prior to acceptance of terms by the lender.
A second mortgage holder may refuse to cooperate in a Short Sale.
The lender may encourage backup offers that exceed the original accepted offer.
The Seller may not have enough cash for repairs of the property.
The lender may not accept the Buyer’s offer that was accepted by the Seller and may counter it.
The Seller may want cash out at closing.
The Seller may not have the debt forgiven and may cancel the sale.
The lenders loss mitigation departments are not staffed to service the large number of homeowners who are in financial trouble with their home loans. They receive thousands of requests and must review each package individually. There are numerous forms to be completed and if the package is not in order, it may be placed at the bottom of the stack. As a Buyer, do not be surprised if you do not receive a response for months!
COMSTOCK REALTY GROUP
SHORT SALES
SELLER NOTES
Seller is hereby notified that Broker is not qualified to provide financial, legal, or tax advice regarding a Short Sale transaction. Therefore, Seller is advised to obtain professional tax advice and consult independent legal counsel immediately regarding the tax implications and advisability of entering into a Short Sale agreement.
Sellers must disclose to Buyers that they anticipate a Short Sale situation.
They must inform the Realtor of any and all liens on their property.
A Short Sale may adversely affect the Sellers’ credit.
Seller will have to provide the lender(s) with:
A hardship letter explaining why they can no longer make their payments.
An authorization letter for Realtor or professional negotiator to speak with the lender.
A financial analysis form.
Tax returns, pay stubs, bank statements, etc.
Other items that may be required by your lender.
A contract submitted for Short Sale approval will not automatically stop a foreclosure sale.
A foreclosure sale may be postponed by the lender upon acceptance of a Short Sale agreement, but a postponement is not automatic.
A foreclosure may be reinstated after a postponement without further notice to the Seller.
Note – Not all Sellers will qualify for a Short Sale approval.
COMSTOCK REALTY GROUP
SHORT SALES
BUYER NOTES
The Short Sale Addendum must be attached to the purchase contract. It gives notice that the debt on the property is greater than the purchase price. The contract is contingent upon the Seller and their lenders agreeing to sell the property for less than the loan amounts. The offer will not be considered accepted until the Buyer receives a written Short Sale Agreement Notice showing acceptance by the lender.
The Buyer may unilaterally cancel the contract at any time before receipt of a Short Sale Agreement Notice.
Notice is given to the Buyer that the closing date may be extended and it may take weeks or months to obtain the lender’s approval for the Short Sale.
The Seller is encouraged to accept back up offers and submit them to the lender. However, if a backup offer is received with more favorable terms and conditions to the lender, Buyer will be offered the right to purchase under the new terms and conditions and will have three (3) business days to agree or terminate the contract.
What this means to you:
Even though the Seller may have accepted your offer, the contract is not valid until the lender accepts the offer and gives you a written Short Sale Agreement Notice.
You may continue to look at other properties in case this offer is not accepted by the lender, and may cancel the contract for any reason before it is accepted by the lender, including, if you find another property that you like better.
The lender may give you a counter offer even if the Seller accepted your original terms.
You may not hear of any progress for weeks at a time.
The Realtors have no control over the lenders’ loss mitigation departments. The lenders are overworked and overwhelmed by the numbers of files they must work daily. It is not uncommon for loss mitigation employees to handle over 300 files at a time. That means 300 calls per day from agents, negotiators and sellers. We want you to understand that this is a long process and the lender wants to be assured that you are willing to wait for their approval. Many Short Sales do cancel because a Buyer gets frustrated with the wait or finds another property. The lender hopes to have a patient Buyer on the contract who understands the long process involved.
