Brooklyn NY real estate listings and homes for sale, home buying, home selling information – ABC Real Estate Services, Inc.

Appraisers, Brokers & Counselors of Real Estate

Short Sale: The lender may let you sell the house for less than the outstanding loan amount, take the proceeds and forgive the remaining debt. When lenders agree to do a short sale in real estate, it means the lender is accepting less than the total amount due. Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose, moreover, not all sellers nor all properties qualify for short sales.

If you are considering selling your property in a short sale, there could be drawbacks. For your protection, I suggest that all borrowers:

Obtain legal advice from a competent real estate lawyer.
Call an accountant to discuss short sale tax ramifications.

As a real estate broker, I am not licensed as a lawyer nor a CPA and cannot advise on those consequences. Except for certain conditions pursuant to the Mortgage Forgiveness Debt Relief Act of 2007, be aware that the I.R.S. could consider debt forgiveness as income and there is no gaurantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid. A lawyer can determine wheather your loan qualifies for a dificiency judgement or claim.

Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect, please see the Delinquent Mortgage Checklist, for the steps we follow.

Call the Lender - We call your lender and speak with the Supervisor in the "Loss Mitigation Department" with the homeowner on the line and we get a verbal authorization from the homeowner to speak on their behalf.
Submit Letter of Authorization - Lenders typically do not want to disclose any of your personal information without written Authorization to Release Information.
Hardship Letter - The sadder, the better. This statement of facts discribe how you got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized or a truck ran over your entire family, but the lenders are not particularly empathetic to situations involving dishonesty or criminal behavior.
Proof of Income and Assets - It is best to be truthful and honest about your financial situation and disclose assets. Lender will want to know if you have savings acounts, money market accounts, stocks and bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.
Copies of Bank Statements - If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it's probably a good idea to explain each of those line items to the lender. In addition, the lender might want you to account for each and every deposit so it can determine wheather deposits will continue.
Purchase Agreement & Listing Agreement - When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer or contract of sale, along with a copy of your listing agreement with your Real Estate Agent.
Preliminary Net Sheet (HUD-1 Statement) - This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions. If the bottom line shows cash to the seller, you probably will not be eligible for a short sale (seller receives ZERO proceeds in a short sale).
Comparative Market Analysis or Appraisal - Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a comparative market analysis (CMA). We can prepare a CMA for you, which will show prices of similar homes (Active Listings on the Market, Pending Sales, Solds from the last six months and Expired Listings of home that didn't sell). Please not that Dylan Williams is also a Certified Appraiser.
Detailed Repair List - A report prepared by a licensed contractor, Home Inspector or Engineer, describing any physical and/or structural problems with your home such as leaking roof, damp basement, insect infestation, ect. The report will show photographs of your home's exterior (front and back) and interior, showing areas in need of repair or replacement, worn flooring, peeling paint or water stains, leaking pipes and holes in walls.

"The only numbers that really matter are the lender's perception of the subject's as-is, fair market value and their maximum recovery from proceeds of the sale."

Now, if everything goes well, the lender will approve your short sale. As part of the negotiation, you might ask the lender not to report adverse credit to the credit reporting agencies, but realize that the lender is under no obligation to accommodate this request.