Orlando Luxury Homes and real estate information - Helen and Malte Strauss, Realtors ® in the Central Florida Region
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What is a short sale?
In a short Sale the lender is receiving less than the owed mortgage amount
A short sale can be a vehicle to sell a property rather than to loose it I foreclosure. In a successful short sale the lender agrees to a sale that is lower that the amount owed on the property. Lenders are not required to accept a short sale. If there are more than one mortgage on the property the owner has to get approval from all lien holders before the transaction can go to the title company. So it can be tough or even impossible to negotiate a successful short sale. Depending on the state law and the borrowers situation the lender might pursue a deficiency judgement against the borrower. With that, the lender will have the opportunity to collect the difference of the sale proceeds and amount owed at a later date. Also there might be tax consequences on the amount that is forgiven. The IRS might view that amount as income and will collect taxes on that. It is a good idea to consult with a CPA and a real estate attorney to get advice on the legal ramifications of a short sale.
Pre-foreclosure sales and short sales are fairly common in the Orlando area these days, since property values have declined and properties are offered well below what they sold for in recent years. Even the central Florida luxury home market is not immune to the real estate crisis and we see short sale offerings throughout all price ranges.
Some lenders are more inclined to work with owners on a short sale than others. It can take from a few weeks up to a number of months to get a short sale situation ready for closing. So regardless if you are planning to sell or purchase through a short sale, be aware of the time involved.
As a seller or buyer talk to a Realtor ® who is familiar with the process and see what would be a viable strategy for you. As a seller you should also consult with an attorney about foreclosure, short sale and bankruptcy to evaluate your position and see which options you have.
Call the lender and get information on who is handling the short sales. Get the name and direct phone number. Ask for the documentation requirements from the lender. Prepare all information needed for a short sale request. Here are the most common ones:
1. Letter of Authorization
Write a letter authorizing the a lender to release personal information to your Realtor, the title company and the negotiator (if you have enlisted the help of an independent short sale negotiator)
2. Preliminary Net Sheet
This will show the closing cost, purchase price, loan balance, and the net proceeds from the sale.
3. Hardship Letter
This letter should explain why the seller got into the financial bind. This should be a plea to the lender to accept less than the full payment. Loss of job, hospital cost, loss of a family member can create hardships.
4. Proof of Income and Assets
The lender want to see a truthful picture of the financial situation. That includes savings, money market accounts, stocks, other real estate holdings and anything of marketable value.
5. Bank Statements and tax returns
Last 3 years of tax returns. If no returns were filed substitute a statement describing why returns have not been filed. At least 3 months of bank statements. If there are deposits or withdrawals that are not self explanatory or described in the other documents add an explanation what they were for and from or to whom.
6. Listing and Purchase Agreement
The agent should provide documentation on the listing agreement, and the marketing and showing activity on the property. Then there should be a market analysis on the property, showing comparable sales that have taken place in the neighborhood with similar properties.
If everything goes well the lender might agree to a short sale rather than to foreclose on the property. Be patient but follow up on the progress frequently.
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