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Owner, Stager

Discussion will be held on:

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Tuesday, June 5LIVE 10:00am – 11:00am

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SHORT SALES: Frequently Asked

Questions

“Top 20 FAQ for Sanity in the Crazy Short Sale World!”

PRESENTED TO YOU BY:

INTRODUCTION:Paralegal at Delaware real estate law firm

Full-time short sale negotiatorChallenging, time-consuming but very rewarding

Difficult time for a homeownerEmployment, marital & medical difficulties

Creditor pressure Rewarding to help homeowner find blue sky

Jigsaw puzzleThanksgiving Dinner

1. How should I price the listing?

• Goldilocks• Homeowner resistance • But it’s a short sale??!!• Poor condition in great

neighborhood• Goldilocks still has the answer

2. How large should the buyer’s deposit be?

•SS lender not interested in amount of the buyer’s deposit•Buyer: Deposit as little as

possible•Seller: The more the better

3. Do we need bank approval to list the

property?

•General rule: Don’t need bank approval

•Trend: Banks trying to exert more control over process

4. Do we need an offer to begin the short sale

process?• Open SS file now

– Title search– Review mortgages to determine options

• Banks trying to get some greater control of process

• General Rule: Need an offer to begin the SS process with lender

• Exceptions:– FHA can start before there’s an offer.

– HAFA/HAMP may allow SS process to begin with lender before there’s an offer but

often problematic as get stuck in the wrong department

– New Bank of America process

5. What about multiple offers for the property?

• General Rule: Submit one offer at time

• A SS contract is like any other contract – with SS contingency

• Market for “back up” offers

6. How much settlement help should we expect the short sale

lender to allow?

• Higher the offer, the more likely the settlement help

•Usual cap is 3% but no guarantee• FHA seller: Cap of 1% of buyer’s

loan amount

7. What about repairs?

• General rule – “As is” transaction• Bank usually will not pay for repairs• No harm in asking but don’t plan on

getting bank help• Use property problems (estimates,

photos, etc.) to challenge valuation

8. When should the buyer do the inspections?

• Early in the deal?– Risk out-of-pocket funds if the SS is not

approved– Become aware of problems early (avoids long

and wasted waiting period)– Can consider restructuring deal if there are

problems with property• After the SS is approved?

– Minimize risk of out-of pocket funds– If discover problems, no recourse other than

walking from deal•Wasted time

•Stuck with offer amount

9. How long will the short sale process take?

• No two deals are the same• MANY variables

• 6-12 weeks for the SS approval – Could be longer.– Could be shorter

– Who knows?• Buyer’s own timetable

10. Will the short sale be approved?

•Never certain •Success = Patient Buyer +

Reasonable Offer + Cooperative Seller

11. Will the lender waive the deficiency?

• Cannot guarantee but always try• Some loan types (e.g. FHA and VA

) and SS programs (HAFA) have a deficiency waiver

• Negotiated resolution options:–Cash contribution from seller

–Promissory note

12. Will the homeowner owe income taxes on the amount of

a waived deficiency?• Don’t give tax advice -- talk to a tax

professional• General rule – forgiven debt treated as income

• Mortgage Debt Forgiveness Act (Expires 12/31/12)

– See www.irs.gov – Not taxable if funds used to purchase or

improve house– Taxable if funds used for debt consolidation or

Bermuda trip– Taxable if used for second home or

investment property

13. What are the credit consequences of a short

sale?• Don’t give definitive credit advice• Many variables considered behind

the curtain• FC/DIL/SS are scored similarly but

may have different long term impact

• Discuss possible impact with a lender or credit counselor

14. How does a foreclosure action impact a short sale?

• Frequently have SS and FC run on parallel tracks

• FC and SS depts. are separate with minimal coordination

• It’s race – pending FC usually not a bar to a successful SS

• Sheriff sale date is IMPORTANT

15. Should the frustrated homeowner just walk away and let

the property sell at foreclosure auction?

• Understandable attitude• Mistaken understanding about

impact of FC route.• IF a FC:

–Deficiency will be larger–Deficiency judgment risks

16. Is the short sale process getting easier?

• Less time wandering the swamp• Still a maze of 800 numbers

• Fewer lost documents• New lender programs and

“efficiencies” --- Still more hype than reality

• Signs of improvement but still challenging, especially for a buyer

• Bank still holds the Aces

17. Should the homeowner continue to make

payments?• Never tell homeowner to stop make

payment– Adverse impact to credit

– Triggers foreclosure process • Some loans require a seller to be

delinquent at settlement• Delinquency does not harm SS

prospects and may help

18. How will the SS lender view the homeowner’s

other assets?

•No two situations the same•SS lender will review all

financial info•Retirement and tax-deferred

accounts not usually a target for the SS lender

19. How does a bankruptcy impact a

short sale?• We don’t give BK advice

• BK can interfere with SS – often kills the SS

• Can get property excluded from BK, or wait until the BK is

discharged• SS negotiator preference to have

homeowner file BK after SS

20. Should I use a third-party negotiator rather than try to

negotiate the short sale myself?

• Conserve your time for profitable activities of buying & selling

• Minimize liability concerns – e.g. deficiency waiver

• SS world constantly changing– Multiple lenders

– Multiple loan types– Multiple short sale programs.

– Ever-changing forms, procedures, and rules• Risk of “too good to be true” – be wary of large pre-payments.

Questions?Concerns?Thoughts?

Do You Have Any

THANK YOU FOR CONNECTING!

www.wardtaylor.comwww.wardtaylor.comContact Information:Contact Information:Short Sale Specialist/Paralegal

Ward & Taylor, LLCBGarrett@wardtaylor.com

(302) 225-2404 – Direct phone(302) 225-1216 – Direct fax

All images were gathered from google.com/imagesAll images were gathered from google.com/images**