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SHORT SALE (Real Estate) A short sale occurs when the proceeds of a real estate sale fall short of the balance owed on the property.[1] In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank's Loss mitigation department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Most Short Sales leave a deficiency balance for which the Mortgagor / Borrower is still liable. In 99% of all cases it is not a settlement-in-full. A deficiency balance will remain while the mortgage broker, real estate agent / broker, loan officers, title and closing agents still remain getting their profit. And no regulatory agency governs this hybrid transaction. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower's financial situation. A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, the advantages include avoidance of having a foreclosure on their credit history and the partial control of the monetary deficiency. Additionally, a short sale is typically faster and less expensive than a foreclosure. In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer. HOW TO DO A SHORT SALE Why Would A Lender Accept a Short Sale? A short sale in real estate is not always a pleasant transaction. There are many ways to lose a home but signing away ownership in a manner that destroys credit, embarrasses the family and strips an owner of dignity is one of the hardest. For owners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or foreclosure proceedings. One of those options is called a "short sale." 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 buying 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 agent, 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 the I.R.S. could consider debt forgiveness as income, and there is no guarantee 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. In some states, this amount is known as a deficiency. A lawyer can determine whether your loan qualifies for a deficiency judgment 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. Call the Lender You may need to make a half dozen phone calls before you find the person responsible for handling short sales. You do not want to talk to the "real estate short sale" or "work out" department, you want the supervisor's name, the name of the individual capable of making a decision. Submit Letter of Authorization Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan. The letter should include the following: Property Address Loan Reference Number Your Name The Date Your Agent's Name & Contact Information Preliminary Net Sheet 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 any. Your closing agent or lawyer should be able to prepare this for you, if you do not know how to calculate any of these fees. If the bottom line shows cash to the seller, you will probably not need a short sale. Hardship Letter The sadder, the better. This statement of facts describes 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 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. Lenders will want to know if you have savings accounts, money market accounts, stocks or 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 whether deposits will continue. Comparative Market Analysis 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). Your real estate agent can prepare a CMA for you, which will show prices of similar homes: Active on the market Pending sales Solds from the past six months. Purchase Agreement & Listing Agreement When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to pay for certain items such as home protection plans or termite inspections. Now, if everything goes well, the lender will approve your short sale. As part of the negotiation, you might ask that the lender not report adverse credit to the credit reporting agencies, but realize that the lender is under no obligation to accommodate this request. short sale, short sales, short sale video, short sales video, video: how to do a short sale, "short sale", how to short sale, how to do a short sale, how to do short sales, short sale profit, short sale profits, mortgage short sale, foreclosure short sale, short sale help, jeff kaller short sale, jeff kaller, ron legrand, russ whitney, jeff kaller short sales, jeff kaller short sale profits, how to short sale, short sale foreclosures, short sale process, short sale magic, real estate short sale, short sale forclosure, bank short sale, short sale package, short sales, short sale specialist, short sale home, buying short sale, short sale expert, short sale experts, short sale investing, the short sale, short sale info, short sale services, short sale company, short sale marketing, short sale procedure, how to find short sale, short sale software, short sale problems, short sale forums, national short sale, short sale secrets, short sale hardship, short sale faq, short sale pro, short sale forum, loss mitigation short sale, short sale hardship letter, the short sale company, short sale leads, free short sale, short sale tips, short sale documents, short sale los angeles, short sale agent, the short sale process, process of short sale, ca short sale, short sale blogs, short sale processing, short sale education, short sale phoenix, short sale example, hsbc short sale, short sale offers, short sale wikipedia, short sale assistance, short sale a home, california short sale, short sale of home, define short sale, short sale miami, short sale center, short sale offer, short sell, short selling, foreclosure short sales, deed in lieu, real estate short sales, short sales in real estate, short mortgage, preforeclosure, pre foreclosure, short sale calc, short sale calculator, short sale offer wizard, short sale wizard, Starting a business, Start your own business, Starting a small business, Small business startup, How to Start a business, How to Start your own business, How to Make Money, How to find a business, business opportunity, how to find a business opportunity, how to make money, learn how to make money, make money fast, make money in real estate, how to make money in real estate, start a real estate business, how to be a millionaire, how to make millions, how to make millions in real estate, the secret, equity deals, how to win the lottery, how to make millions, how to become a millionaire, how to quit your job, quit your job, find a new job, find a business, how to find a business, how to start a business with no money or credit, how to start a business with no money, start a business with no money, private lenders, how to find private lenders, how to find money, how to find investors, how to find cash buyers, how to find cash, how to flip houses, flip this house, how to flip this house, how to renovate a house, buy real estate in ira, invest with IRA, how to invest with IRA, how to invest with your ira, business opportunity, internet business opportunity, internet marketing, mlm, how to start an mlm business, how to make money in mlm, how to make millions in mlm, how to get out of the rat race, I'm tired of my job