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How to Short Sale Your Home?
A short sale is when you sell your house for less than what is owed on your mortgage. There are four parties involved in the short sale: The seller, buyer, the bank or the servicing company who services the loan and the investor who has financially backed the loan. Sometimes the servicer and the investor are the same, but rarely. In some cases there is a 5th entity and that is a mortgage insurance company.
We are Certified Short Sale Professionals
The seller and the buyer will agree upon the terms of the purchase and then submit the offer into the bank for approval. Once they have obtained all the documentation they need and obtained a current value on the property, they will forward it to the investor and/or the mortgage insurance company for final approval.
The Process of a Short Sale
- You will sign a listing agreement with Go Las Vegas Real Estate and the listing will go up.
- You will get a buyer and once the purchase agreement has been agreed upon and fully executed, the house will go into contingent status while the short sale gets approved by the bank. This will usually end the viewing stage of your home by potential buyers.
- The short sale package will go into the bank for approval. This will include all your financial information such as the last two months of bank statements, the last two years of tax returns, your last two paystubs (or Profit and Loss Statement if self-employed), a letter that explains your hardship and a financial statement of all your debt obligations versus your income.
- A broker priced opinion (BPO) will be done by the bank to assess the value of your home. This is like a mini-appraisal done by a Realtor whom the bank hires to make sure the offer submitted into them is at market value. If the offer is not where the bank would like for it to be, they will counter-offer a different price.
- The bank may require additional documentation and updated financial information as you move through the process.
- Once the bank has the short sale package to the point where they feel they have all the information they need, they will submit it to the investor for final approval.
- An approval letter will be submitted to Go Las Vegas Real Estate.
- The buyer will typically have 30 days from when the letter is received to close escrow.
We Have Personally Closed Short Sales with Many Banks
Just a few examples include: Wells Fargo, Wells Fargo Home Equity, Chase, Bank of America, ASC, Indy Mac, BSI Financial, PNC Bank, PNC Mortgage, Aurora, Citi Bank, Wachovia, BB&T, Central Mortgage, GMAC. Let us simplify the short sale process for you.
Why Should I Short Sale My Home?
There are other options to doing a short sale such as a loan modification, bankruptcy or even letting your home go into foreclosure. A short sale isn’t necessarily the right choice in every situation. However, for many people it is the best choice. In many cases, there are no tax consequences, you are able to have less damage done to your credit and a deficiency judgment will not be held against you. It is important to weigh all of your options. Go Las Vegas Real Estate, tax advisors and sometimes even an attorney can all help you to figure out whether or not a short sale is right for your set of circumstances.
Five (5) Most Common Reasons a Bank Will Allow a Short Sale
- Loss/Reduction of Income
- Loss of Job
- Relocation Due to Employment
- Military Transfer or Deployment
Many banks will allow for other types of hardship such as medical hardship, death, or in the case of investment properties, the loss of tenants and are unable to rent the home out again. But these are on a case by case basis. You must supply the bank with documentation to prove your hardship. At Go Las Vegas Real Estate, we will assist you in putting together your hardship letter. Our hardship letter template makes it easy for the bank to recognize your hardship and understand why you are trying to short sale your home.
If your hardship is due to financial reasons, you will need to prove this through bank statements, tax returns and paystubs. The general rule of thumb is that you must be upside down when calculating all of your monthly expenses. This includes your mortgage, school loans, credit card debt, food, child care; car loans, gas, utilities, clothing expenses, medical, etc. all totaled is greater than the income you bring in. Again, each case is different so it is important that Go Las Vegas Real Estate has all of your information to better help you through the process.
Do I Need to be Delinquent on My Mortgage in Order to do a Short Sale?
In many cases, no. As long as you are able to prove through documentation that a delinquency is eminent you can qualify for a short sale. If you know you will losing your job, will be getting a pay cut or need to move due to employment in the very near future, you can present to the bank that you are trying to be proactive in avoiding a bad situation. Just note, that a non-delinquent short sale typically takes longer to get approved and can be more difficult to negotiate. Some banks and mortgage insurance companies require that you must be delinquent at least 60 days in order for them to review a short sale. Go Las Vegas Real Estate has worked with many different banks and will provide you with their requirements prior to the short sale. If you are successful in getting a non-delinquent short sale through, it will greatly help your credit.
How Much Will a Short Sale Cost?
The bank will pay for many of the typical seller’s cost of the transaction. Such as Realtor commissions, title fees, taxes, etc. The one thing you have to pay for is the homeowners demand statement (what is owed, if anything) and the Re-Sale Package which contains the CC&R’s, Budget, Bylaws, etc. Nevada law requires the seller to provide this to the buyer. The Re-Sale Package must come directly from the Homeowners Association. You cannot give them your copies. This can range anywhere from $50 to $400 depending upon the Homeowners Association and what they charge. This will be ordered and paid for after you have received the short sale approval from the bank in writing.
In some cases, the seller will need to pay an additional amount to a first or second lien holder or mortgage insurance company if applicable in order to get them to approve the short sale or to get a release of liability. If you do not have the money to pay for this, a promissory note can usually be negotiated. The bank will allow you to pay the amount off over time, usually without paying interest.
What is a Deficiency and a Release of Liability?
A deficiency is the difference between what you owe on your mortgage and what the bank nets from the short sale after they have paid out all of the fees. Example: You owe $200,000 on your home. The house sells for $100,000. The bank has to pay out Realtor commissions, title fees, Homeowners fees, taxes, etc. What is left after all that is what the bank nets. For our example let’s say $89,000. Your deficiency amount is $200,000 – $89,000 = $111,000. $111,000 is the amount you would held liable for if you do not get a release of liability.
A release of liability is when the bank takes the deficiency amount and writes it off. They will not pursue you for that amount in collections and will issue you a 1099C which you will file during your next tax season. This must be stated in the approval letter if the release is to take place. Go Las Vegas Real Estate cannot interpret the law and advise you to consult an attorney on your approval letter to determine whether or not you do have a true release of liability.
If you do not get a release of liability in writing, there is no guarantee that the bank, the investor and/or mortgage insurance company will not pursue the debt. The release of liability will be established during the stages of negotiations and must be stated in the approval letter.
In many cases there will be no tax liability on the amount issued to you on the 1099C, but again each case is different. You must consult your tax advisor to determine whether or not you have a tax liability.