Short Sale Checklist -When You Owe More On Your House than it is Worth Process
How is a seller that is underwater on their mortgage to proceed with a home sale?
Remember ‘underwater’ on a mortgage means you owe more on your mortgage that you could receive with the sale of your home…thereby the term underwater. Hope that makes sense to you.
In fact most potential clients will ask me when selling your home when it is a short sale- where do I start?
First, the seller needs to meet with a knowledgeable short sale real estate agent like the North Kingstown short sale agents who will list the RI home for sale. The agent will review the comparable solds of homes in the last three months and get the seller’s concurrence on the sale price. It is best to price the short sale home slightly under market value in order to entice buyers to put in an offer and wait the months until closing can occur. Understand that as the seller you will have no proceeds from closing with short sales. Do not let that hold you up from talking to a North Kingstown short sale agent about a short sale, the main endpoint in a short sale is to get you free and clear from the burden of the mortgage you are unable to pay. You want to move on with your life.
Short Sale Checklist -Short Sale Process
It is the responsibility of the seller to organize and follow through with providing all the needed paperwork and documentation the lender requests to get the short sale process on track. This is given to your Realtor who will coordinate the process for you. Detailed documentation must be provided to the lender. Your short sale Real Estate Agent who knows the process will guide you through it well. Here is a quick list of documents you will need:
- 2 years of Federal and state tax returns with W’2s
- Two months bank statements, IRA and 401K statements
- Current monthly budget
- All mortgages with account numbers
- Any pending bankruptcy
- Hardship letter (make them cry in this letter) and any documentation supporting the hardship
- Last 30 days of pay stubs
After the house is listed with an agent and a good offer is received from buyers, it is then submitted to the Bank/lender for approval or counter – offer. A home does not go into true ‘short sale’ status until the seller receives a ‘bona fide offer’ from a buyer on their home. Once the short sale sale is agreed to by the homeowner’s lender, the next step for the lender is to get a Brokers Price Opinion (BPO) or two done by appraisers on the home to determine what the current market value is. Here they will either agree or disagree with the marketable sale price of the home set by the Realtor based upon the BPOs received.
The lender also estimates here what their true loss in dollars will be upon the sale of the home. The lender goes back to investors that have a part of the mortgage to determine what loss amount they are willing to absorb. An agreed upon short sale price for the home will be then made. A short sale approval from the bank holding the mortgage will be received with conditions and closing time frames (usually 30-45 days from receipt of lender’s approval letter).
Buyers’ agents need to explain to buyers who want to purchase a home in short sale status that they need to be prepared to wait at least 3 months to close ( most times it takes less time but it is important to be mentally prepared for the wait). If the buyers are not prepared to wait this time frame, then perhaps making an offer on a home in short sale is not a wise idea. These buyers need to look for a traditional home sale instead.
It is important to work with a North Kingstown short sale agent who understands the short sale process and has a ‘team’ (attorneys and negotiators) in place to move the transaction forward for the seller with the lender. Understand that the goal of this North Kingstown short sale agent is to get a waiver of deficiency judgment for you from the bank. Also, it is important to check with an accountant on any tax consequences of a short sale.
Yes, even in 2020 and beyond short sales are part of the real estate life and ensure you have the right knowledgeable short sale agent that guides you well. My guidance helped many dozens of clients in the 2008 housing downturn in selling the house with bank approval. And all with a ‘waiver of deficiency judgment’ so the Lenders could never come back on them for the monies the Banks forgave (shortfall on the mortgage). Talk to me if you are having life issues that necessitate a possible short sale.
Ginny Lacey Gorman is a member of short sale superstars and does RI short sales right. Ginny works successfully with a legal team and negotiator in making the short sale happen for her home sellers. If you are underwater on your mortgage or behind on your mortgage payments call me, Ginny Lacey Gorman, for a confidential interview and to find out your options at 401-529-7849 today.
Short Sale Checklist -Short Sale Process
Ginny Lacey Gorman is your go to waterfront Rhode Island Real Estate Agent for real estate in RI and beyond…knowing the geographic area, schools, happenings and important tidbits of local information. Email her at ginny@RiHouseHunt.com or call her at 401.529.7849 to make an appointment to find the home of your dreams too!