The Short Sale: A Seller’s GuideCompliments of: John Mazzara,

Broker Associate

Mortgage Problems?

• Are you facing the threat of possible foreclosure? • Has the value of your mortgaged property fallen below

the price your originally paid?• Can you no longer afford your monthly mortgage

payments?

There is hope in this difficult & stressful time. You may be in a position to consider a Short Sale. 

What is a Short Sale?• This is a sale of property in which the

proceeds of the sale are less than what is still owing on your mortgage with the Bank

• The entire proceeds from the sale of the home are turned over to the Bank

• The Bank makes the final decision to accept or decline any offers made on your home

• The Bank may close the book on your outstanding debt For Homeowners in the U.S.

This is the official site:

www.makinghomeaffordable.gov/7-9million Homeowners are eligible for this plan

Do I Qualify for a Short Sale ?• You must answer YES to these 4 requirements:

The Market Value of your home has dropped (requires documentation to support)

The Mortgage is in default or potential defaultYou are experiencing Financial Hardship (submit a

Letter of Hardship to the Bank)You, the Seller, has not other Assets

Financial HardshipDefined

A Letter of Hardship has to be submitted to the Bank that includes the following:

Why you can no longer pay your mortgage

Why you will not have the funds to pay off the balance remaining from the short sale (see below)

Example: Mortgage Balance $120,000 Short Sale -$ 80,000

$ 40,000 owed

Explain why you can’t pay the balance

Examples of Financial Hardship:

Lost your job and currently unemployed

You are experiencing a medical or health emergency or a sudden illness

Recently divorcedYour spouse passed away

Important Points about Short Sale:

• To qualify for a short sale, a Buyer must make an offer to purchase your home

• The Bank has a right to reject the Short Sale

• If assets are identified, this may impact the terms of the short sale

The Short Sale Process• You it is very important that you understand this process:

Know who owns your Mortgage (the Bank is a loan server) Ex: Fannie Mae

You sign a listing agreement with your Realtor before selling a Short Sale with third-party approval

Your Realtor finds a Buyer who makes an offer for less than the amount you owe on your mortgage

You accept the Buyers purchase offer You & your Realtor prepares a Short Sale Package to fax to your

Bank You sign a Borrower’s Authorization Form, allows Bank to release

info

The Short Sale Process cont’d1. The Short Sale Package is assigned to a Loss Mitigator, who works

with the Bank and communicates with your Realtor1. The Loss Mitigator is a third party participant, who’s role is to design the best

financial deal possible for the Bank in an effort to keep their losses as low as possible

2. The Loss Mitigator determines if you qualify for a Short Sale

3. If you qualify, the Bank will request a third-party Interior BPO (Broker Price Opinion) or a full appraisal of your property. (You do not have to pay for this)

4. To determine the amount of equity, the Bank assigns a Real Estate Broker to submit a BPO report. This includes: real estate market info, an analysis of the neighborhood & comparable prices of similar

homes in your region to detmine Current Market

Value

The Short Sale Process cont’d5. The Bank will make a decision on accepting the offer and the Short

SaleNote: In the meantime, your house will keep listed for sale. In some States, they Buyers are not locked into purchasing the home until the Bank actually signs off on an offer. A realtor can generate multiple offers. This gives the Bank a wider selection to choose from, that may increase the chance of the Bank accepting and approving one of the offers.

6. Once the Bank signs off on the Short Sale, the process reverts back into a typical house sale

7. The transaction will close when the Buyer delivers the funds, the Bank

releases the lien on the property and you, the Seller delivers the deed

8. The Bank now releases you from your outstanding mortgage!

Understanding the Short Sale Package• You are required to submit this to the Bank. The purpose: show

the financial hardship & unable to pay the mortgage or the outstanding balance between the short sale & the balance

• This can vary according to Lender, but includes:

1. A Cover Letter: Loan number, social security number, foreclosure date if applicable, name and contact info, property address, name and contact info of your Realtor & the contents (additional info in this package)

2. Letter of Authoriazation: authorizes the Bank to release info to your Realtor

Understanding the Short Sale Package3. Purchase & Sales Agreement: You must have an agreement completed before submiting to the Bank. This agreement sets the terms of the sale. (The final Sales Agreement will be drawn up after final negotiations)

4. HUD-1 Settlement Statement: This is an estimate only. Shows the Bank you will not profit from the sale

5. A Financial Statement: Shows the Bank, that you, the Seller are financially unable to make further mortgage payments (Must be updated every 30 days)

6. A Hardship Letter: A letter you write to the Bank

explaining your circumstances (financially) 1

to 2 paragraphs

Understanding the Short Sale Package

7. Last 2 Years Tax Returns

8. Last 2 Paystubs (update every 30 days)

9. Last 2 Bank Statements (update every 30 days)

10. Repair Estimates: Consider getting a Home Inspection done. This shows the buyers the state of the home. Submit a list of known repairs to the Bank, along with estimates on the cost of completing the repairs

Behind the Scenes• Your Realtor needs to know the name of your Loss Mitigator

& their contact info, do not fax your Short Sale Package without the appropriate follow-up

• A Loss Mitigator works on hundreds of cases at once. This increases the risk of misplacing documents!

• Your Realtor will develop constant contact to ensure the documents & other requirements are received and being processed

• This is a lengthy process – Be Patient

Delays in Short Stays

Reasons a Short Sale delays:Offer price is too lowThe Short Sale Package is incompleteThe Seller does not qualifyThe Buyer does not qualifyPoor communication between the Seller, the Realtor &/or the Bank

Thank You for reading our complimentary guide, contact me for a Free consultation if you

are interested in pursuing if you qualify for a Short Sale