Short Sales Explained

There are many ways to lose a home when the homeowner is in financial troubles. Losing a home through foreclosure or bankruptcy often times destroys credit, embarrasses the family, and strips an owner of dignity. For owners who can no longer afford to continue making mortgage payments, there are alternatives to bankruptcy or foreclosure actions. A Short Sale is one of those options. When lenders agree to do a Short Sale, it means the lender is accepting less than the total amount due. This option has many advantages over foreclosures or bankruptcy.

But to be technical, here's a more official definition:

• A homeowner is 'short' when the amount owed on his/her property is higher than current market value.
• A short sale occurs when a negotiation is entered into with the homeowner's mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then 'sold short' of the total value of the mortgage.

For homeowners to qualify for a short sale, they must fall into any or all of the following circumstances:

• Financial Hardship – A hardship is a life changing situation that affects the borrower dramatically and results in an inability to pay the mortgage debt. Some examples of hardship include separation or divorce, medical bills, inability to work due to health reasons or illness, death of a spouse, job relocation, reduced income or unemployment, business failure, unemployment, reduced income, too much debt, payment increase, damage to property, incarceration.
• Monthly Income Shortfall – In other words: "You have more month than money." A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
• Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.

For homeowner to increase their chances of a bank agreeing to a  Short Sale, they can do some of the following:

• Prepare the necessary documentation including 2 years tax returns, current paycheck stubs, unemployment benefit statement (if unemployed), last two bank statements.
• Sign a listing agreement with a knowledgeable short sale realtor.
• List the property for sale.
• Cooperate with access, showings, offers and realtor.
• Vacate the home at the close of escrow.
• Be responsible to maintain the home in "show" condition.
• Cooperate with bank and bank negotiators and provide all requested documentation.

This seems simple enough, but it is a complicated process that takes the expertise of experienced professionals. We hold the CDPE® Designation and are ready to identify all possible options and, when possible, assist in the quick execution of a short sale transaction.

If you have questions or feel you may qualify for a short sale, please call us at (858) 229-9212 or Email us at Steve@SanDiegoExperts.com for a free consultation.