Short Sales 101
 

What is a short sale?

• When a homeowner owes more on their mortgage than their home can sell for in the current market (a.k.a, upside-down), the homeowner can try to avoid foreclosure by negotiating with the lender to accept a “short” payoff.

Are you a candidate for a short sale? Ask yourself this question:

• Do you have a true hardship that is keeping you from making your payments?
• Think job loss, job transfer, illness, or other challenge. Discuss your particular situation with your lender. Loss in value due to market condition does not qualify as hardship.

What do you need to do to prepare for a short sale?

• First, find a Realtor® who is experienced with the short sale process, who knows how to negotiate with banks, and will be your partner to get the transaction closed.
• With the help of your Realtor®, compile your hardship letter and other necessary documentation which comprises the Short Sale Packet.

What goes in your hardship letter?

• In your own words (and in your own handwriting is best), describe the circumstances that have caused you to be unable to make your monthly mortgage payments.
• Be personal and sincere about your situation, and include as much detail as possible. We want them to want to help you.

What goes into the necessary Short Sale documentation packet?

• Proof of income & assets, including:
  • Bank Statements
  • Pay Stubs
  • Assets (investment accounts, stocks, CDs, other properties)
• Proof of hardship, which might include:
  • Bills
  • Unemployment Records
  • Death certificates
  • Divorce papers
• Preliminary net sheet, prepared by your Realtor®, reflecting the price you hope to get, less the cost of the sale. Include a comparative market analysis, prepared by your Realtor®.

Prepare your home for sale

• With the help of your Realtor®, price your house to generate an offer
• Prepare your home for sale
• If you do not get showings and/or an offer in the first 2-3 weeks, lower the price.
• Keep lowering the price until you receive an offer.

Submit offer to the bank along with the short sale package

• Your experienced Short Sale Realtor® will take it from here
  • They will submit the packet to the bank
  • They will follow up to make sure it has been received
  • They will be assigned an asset manager with whom they will communicate throughout the short sale negotiation
  • If all goes well, they will follow the transaction through to a successful close

1. Say goodbye to your home now.  Get over it...it's time to move on. Prepare it for the next person who is going to live in it. Picture the day you hand over the keys and move into your new home.
2. Take the "you" out of it.  Get the family photos off the wall, neutralize paint colors, pack up personal collections ahead of time. Buyers want to picture themselves living in your home. Taking the you out of it allows them to see the house and not be distracted by the stuff.
3. Lean and mean!  It's time to sort through stuff, throw away, sell or donate excess items, and prepack those you want to take with you. Clear the kitchen counters, minimize books in bookcases, get things off the floor of the closets. Put your bathroom essentials out of site.
4. People open doors!  Make sure your closets and cabinets are neat & tidy. Less stuff makes them look more spacious!
5. Rent a storage unit  Store excess furniture and prepacked boxes to give the feeling of spaciousness.
6. Take down fixtures or window coverings that you plan to take with you in advance.Keep these items off the bargaining table if they are important to you!
7. Make repairs now.  Fix anything you know is broken or not working in advance. This will keep them off the Home Inspector's report and will show the buyer that your home is in good repair. Consider painting over any bold walls in more neutral shades.
8. Clean, clean clean!  Make sure your home shines! Clean windows, baseboards, fans & fixtures, remove cobwebs, power wash decks & walks.
9. Give it the once-over.  With the help of your Realtor® or a friend, stand back and take another look. Does your home have curb appeal? Are the shrubs and lawn in good condition? Does it beckon people in? If not, consider adding some pots of bright flowers, a new welcome mat, a new coat of paint on the front door. Make it shine!
10. Call in a professional.  Have a professional stager add the touches that will cause buyers to want to stay a while. These folks know what they are doing, and know how to evoke the emotion in buyers that generate offers! It is worth the investment.

Today's the day! Your offer has been accepted! Now you wonder...what happens next? It's time for the team to get to work. Your lender, title company and realtor is the Dream Team that works to get the job done!

Here are the steps to getting the keys to your new home.

1. Buyer's remorse. Expect it. Everyone gets it. Then get over it! You've wanted to get to this moment through months of looking, writing offers, getting beat out, writing more offers, and on and on. You're where you want to be! Let's get the escrow closed!
2. Contract and Earnest Money to Escrow. Your agent will arrange for the fully executed contract (signed by both buyer and seller) to be delivered to the title company handling the escrow. Your deposit check is deposited with the title company and cashed at this time. Keep in mind that if the contract is cancelled, the escrow officer must receive mutual agreement from both buyer and seller before earnest money can be returned. Your agent is responsible for making sure you stay within the bounds of the contract so that your money is protected.
3. Loan Approval. As soon as possible after agreement, meet with your lender to proceed with loan approval. Loan approval has the longest lead time in the escrow process, so it is important that you get on this as soon as possible to avoid any delays. Your lender will also schedule an appraisal to ensure that the  purchase price is supported which is necessary for loan approval.
4. Inspections. Your agent will schedule any desired inspections that you are responsible to pay for. You are free to choose the inspectors, or your agent may have referrals for you. He or she will receive reports of any inspections coordinated and paid for by seller. You are welcome to be present at the inspections, and most inspectors welcome any questions you might have.
5. Disclosures. The seller must deliver to your agent required disclosures about the property such as the Transfer Disclosure Statement (TDS) and Seller Property Questionnaire (SPQ), usually within 7 days of agreement. Through these disclosures, the seller must reveal any material facts that might influence your decision to purchase the property. 
6. Negotiate repairs. Should any of the inspections reveal items needing repair, you may ask the seller to address them through a "Request for Repair" form provided by your agent.
7. Contingency Removal. Once the loan is approved, the appraisal comes in at value, and all inspections and disclosures have been reviewed, it is time to remove all contingencies and move to close the escrow. This must be done in writing by your agent and usually occurs at Day 17. At this point your earnest money deposit is now committed to the contract, and the seller has a right to pursue this money should you cancel the contract past this point.
8. Moving to Close. The loan documents are prepared and sent to the title company, and you will be contacted by the title company to set an appointment to sign them.  You will also need to bring necessary closing funds in the form of a cashier's check in the amount given to you by the escrow officer The seller will also set a separate appointment to sign their necessary closing documents.
9. Final Walkthrough. Within 3 days before the close of escrow, you and your agent will visit the property one last time to make sure it is in the same condition as when you made the decision to purchase it.
10. Utilities. Make sure to call the appropriate utility companies to schedule your utilities to be transfered over. Your agent will be able to supply you with a list of local companies.
11. Closing. A few days after signing, depending upon the lender and title company and their schedules, your loan will be funded and the deed will be recorded at the County Recorders Office.
12. It's all yours! Your realtor will meet you to hand over the keys to your new home!

Remember that you don't have to do all this alone! Your agent will help you through every step of the way. He or she will keep you on track with the timelines of the contract, and protect your interests throughout the process. Nothing ever goes completely as planned, so your agent and other professionals on the team will help navigate any pitfalls and get the transaction back on track.