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Short Sale Process

A Short Sale is a transaction that sells without satisfying all the lien holders’ full outstanding balances. In other words, the sale price was short of a full payoff

AREG has helped clients as far back as 2007 complete the short sale process.  An attorney is often a crucial team member in determining and evaluating what is best for a client. Please note though that attorneys specialize in certain areas and also have their own agenda so the process of choosing an attorney should be done very carefully. 

Evaluating if you or someone you know qualifies for a short sale will start with determining if there is a hardship that would be approved by the lender(s). This is the most crucial factor that must be present for a bank/lienholder/lender to accept less than what is owed.  Hardship categories that are generally accepted are;

  • Death of primary borrower
  • Loss of employment or under employment that prohibits the borrower from being able to keep up with his/her payments
  • Divorce
  • Medical hardships
  • Job re-location

New hardships we have seen approved are;

  • A Family growing out of the residence
  • A combination of these reasons
  • Not being able to afford the re-adjusted price due to an adjustable loan or balloon payment.
  • A burdensome commute due to a change in job

A bank will require the borrower to prove the hardship by supplying detailed records.  Many short sales would have succeeded if the borrower had been able to get through the burden of supplying all these documents.  The documents include Bank statements, Employment records, identity affidavits, relocation orders, etc.  A borrower should be prepared to provide some of these documents multiple times throughout the process. The bank will provide the list of documents they require.

Next, the borrower who now is a seller needs to find a buyer for their property.  Often times these properties are in distress, just like their owners.  If the seller cannot at least get the home cleaned and ready to sell, often it will sit until someone offers a discounted price because the house shows poorly and will not attract a homeowner because they do not want to take on such a bug task.  If that is the case, an investor who is use to “rehabbing” a property may come in but the price will reflect the need for more extensive work.  It takes a skillful broker to be able to direct the preparation without expending a lot of money.  But it also takes a committed seller to cooperate in preparation as well as showing to prospective buyers. 

WHY should the seller bother to put forth the effort to make the property look good???.  The best answer is because if a buyer who will pay what the bank will accept is not found, the house will proceed to foreclosure.  Why avoid foreclosure (?) this is a whole different topic, but the quick answer is;

  • To preserve some portion of their credit so they won’t be charged exorbitant credit rates for the rest of their life.
  • So you can control the exit of the property.  Waiting for foreclosure is an excruciating process.
  • So you can get a decent rental after selling.  Most landlords will charge extra to someone who has a foreclosure on their credit.
  • A lender is more likely to loan again to someone who has gone through a short sale than a foreclosure.   

 

AREG will meet with you to evaluate your situation.  We can also refer you to an attorney many of which offer a free or low cost evaluation of a person’s situation to help them make the best choice.   Please note that as in any field there are good and predatory individuals. The scheme we can warn you about that we have seen is an attorney who wants people to do bankruptcies so they can charge crazy money for the bankruptcy proceedings. Other attorneys just don’t know the current trends in short sale proceedings and may unduly scare a client.  So be an educated consumer and know that the short sale process is getting much more predictable and successful.

You should also consider your timeline.  If you have waited and are very close to a foreclosure, Bankruptcy may be the only way to stop it long enough to make other choices.  Another way is the Foreclosure Mediation law that came into effect July 22, 2011.  (See below) advice to sellers is don’t expect quick results, even the best short sale takes 3 -12months (unless it as gone through a pre-approval).   So if you are determined to get out of the property, a short sale is one of your options. In any case, don’t delay, get going asap, because you need to be able to show a current hardship, if you recover too much, the bank will not approve your hardship and you may get stuck where you don’t  want to be.

Please note, as of April 2013, our market has been on a fast track rebound. As prices rise, sales that would have been short may turn into an easier short sale, break even or a profit for the seller.

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click here to email Paula Anderson of Anderson Real Estate Group of Bellevue WA click here to email Wendy Stansbury of Anderson Real Estate Group of Bellevue WA