What is a Short Sale?

A Short Sale is one way of avoiding foreclosure and bankruptcy. It is when the lender accepts less than the loan amount (a discount on the loan) and releases the lien on the property at closing, without requiring the owner to make up the difference. I have made Short Sales one of my specialties, and can guide you through the process either as the buyer or the seller. If you are a buyer and want to make an offer on one of my short sales, please see the instructions at "Preparing an Offer on a Short Sale" under Useful Links. If you are looking to avoid foreclosure or bankruptcy, and can no longer afford the house you have, please contact me. I have several resources at my disposal to help you with your unique situation. If you have not received a notice of foreclosure yet, you still have several options. Let me help you decide which one is best for you. Email me or call me at 404 978-2212.

Frequently Asked Questions (FAQ)

Who Qualifies for a Short Sale? In order to qualify for a short sale, the seller must prove to the bank one or more of the following conditions:

· Loss of job, and difficulty in finding new suitable job

· Job Relocation, when equity is deficient

· High medical expenses due to disability, injury or illness in family

· Divorce

· Unable to afford the loan from the beginning

· House needs unexpected major repairs

· Overextended Credit

· Changing Economy

· Adjustment in mortgage payment due to interest rate or an unforeseen increase in living expenses. Incidentally, these are also the most common reasons for a foreclosure.

Why Would a Lender Accept a Short Sale? Why would a lender accept less than they are owed? Because the alternative is a foreclosure. Just as with the borrower, there are significant consequences to the lender if they foreclose.

· The legal costs of eviction and repossession,

· The loss of loan payments during the foreclosure process until it is re-sold

· A foreclosed house will need work before it can be resold

· After the foreclosure, the bank has two options: Sell it at the courthouse steps, or try to resell in the market. If they resell in the market, they are penalized by the government by freezing 3-10 times the loan amount so that the lender cannot lend those funds to another borrower. Will my lender consider a Short Sale if the mortgage is current? Sometimes, some lenders will accept a Short Sale file for approval on loans that are not delinquent. Other lenders will not accept the file until the loan is delinquent. Do lenders approve all Short Sales? NO What if a property needs work, can I still apply for a Short Sale? Yes. In fact, lenders are more motivated to do a Short Sale on a property that needs work than on a property that doesn't. The lender knows the risk of loss goes up when they foreclose on a property that needs lots of work. What is a Short Sale Packet and What Needs to be in It? A short sale package it used to determine whether a homeowner can afford the property. Most lenders already have a standard package which they will send to the borrower upon request. The borrower is expected to provide financial information to include income and household expenses. The seller must fill out forms with the Listing Agent to be submitted to start the Short Sale process - and submitted with any offer.

These forms include:

· The Listing Agreement

· Authorization to Release form (to allow agent to discuss with bank)

· Hardship Letter (see "How to Qualify" above)

· Financial Statement

· Seller Net Sheet (a copy of the HUD form with offer)

· Contract (when offer is accepted)

· Buyer's Proof of Funds (with offer) The Buyer must provide additional items as well.

Full details can be found at "Preparing an Offer on a Short Sale", but the basics are:

· Earnest Money check of at least 1% of sales price.

· Special Stipulations form · Proof of Funds · Contract stating buy "As Is" How Long Will the Process Take? Buyers need to realize that this is a lengthy process. It can take 45 business days from the time the offer is submitted to the bank to the time the bank answers with an acceptance or rejection of the offer. Patience is required. What are the Tax Consequences to the Seller of a Short Sale? Before, the Seller was sometimes required to declare the difference between the loan principal and the amount the bank received as income on their tax forms, and pay tax on it. In November 2007, a law was passed that changed this. Effective January 1, 2008, "Forgiven Mortgage Debt" (the difference between the principal and the amount the bank received) is excluded from taxable income. There are restrictions. In order to qualify for this exclusion, the house must be occupied by the owner as a principal residence. (Not a summer home, vacation house, rental property, etc.). Investors do not qualify.