With over ten years of experience facilitating Short Sale contracts, the experts at the Andora Group are committed to completing quick and successful Short Sales for our clients. We are Certified Distressed Property Specialists (CDPE) and have personal relationships with many loss mitigation agents working for the lenders. Because our detailed, systematic process allows us to submit our offers in an accurate, complete and professional manner, lenders know that our files will make it to the closing table. Experience truly makes the difference between a successful Short Sale closing and a long, drawn-out process.
A Short Sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property. Sellers seeking a Short Sale should also have some sort of hardship which has caused them to be in arrears and unable to continue to pay. By allowing a Short Sale, the lien holders agree to release their lien(s) on the real estate and accept less than the amount owed on the debt. This is usually done when a homeowner has fallen behind on payments and the property is facing foreclosure.
A Short Sale is often used as an alternative to foreclosure because it mitigates additional fees and costs to both the creditor and borrower. While credit is also typically damaged much less than from a foreclosure, both often result in a negative credit report against the property owner.
Your mortgage lender will be considering a number of factors in deciding whether to approve a Short Sale. A review of your circumstance, whether you deserve a break due to financial hardship caused by uncontrollable circumstances such as death, divorce, layoffs or illness. There are substantial costs incurred when a lender forecloses on a property. They will take a hard look at whether it would be cheaper (or more profitable to them) to simply proceed with the foreclosure process on the house, make any necessary repairs and sell it through an agent. How many other real estate owned (REO) properties they have in their portfolio will affect their decision as well.
Once the legal fees are paid the legal part of the foreclosure processes is complete the lender still needs to sell the property and try to recoup some of their money. The lender stands to incur the same cost to market and sell the property as the homeowner, including cost of repairs, marketing costs, Real Estate Professional commission, cost for an Appraisal, Attorney fees, title fees, taxes, etc. In today’s market, a lender is still likely to end up selling the property for less money than they are owed. And that doesn’t include the additional expense of foreclosing, carrying costs (taxes and utilities) while the property sits vacant producing no income. This is why a properly submitted and documented Short Sale package can be very appealing to a lender.
Short Sales are usually beneficial to mortgage lenders and homeowners in situations where:
A “hardship” is typically due to job loss, decrease of income, increase in expenses, divorce, medical emergency, or death. Most lenders will consider a Short Sale if the amount of the mortgage payments and taxes are too much for the seller to pay.
The owners of the property must be able to show they are in a negative cash flow situation or are about to become delinquent on their mortgage payments and will be facing potential foreclosure action in the near future. The homeowner(s) must show a financial inability to get caught up with their payment and the inability to continue making payments in the foreseeable future. A financial worksheet is helpful in making this determination.
The property should be currently valued for less than what the homeowner(s) owe their mortgage lender(s). In the Short Sale process, the lender will have a valuation done by either a licensed appraiser or another agent in the marketplace that is familiar with the market trends. This valuation is commonly called a BPO (Brokers Price Opinion).
When you stop making your payments, the foreclosure process begins, regardless of you short selling, trying to qualify for a loan modification or anything else. The foreclosure process may still be going on in the background the whole time. What the lenders want to do is go to foreclosure sale as quickly as possible in the event they do not approve the Short Sale.
Any lender will tell you that each foreclosure postponement through Short Sale is handled on a case by case basis. Even if the lender agrees to the foreclosure postponement through Short Sale, the investor may not. If the lender feels the offer is good then they will normally offer a 30-day extension if the foreclosure sale has been scheduled. The lesson here is you need to hustle to get your documents to us so we have a complete file for the lender’s decision.
Our goal at The Andora Group is to receive full forgiveness of the debt (full satisfaction). In order to achieve this in some cases sellers may be asked to sign a promissory note for part of the difference between the remaining loan balance and the payoff amount or require a cash contribution at closing.
Any unpaid balance owed to the creditors is known as a deficiency. Short Sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties. As we said above, The Andora Group always attempts to get a full satisfaction from the creditors, releasing the borrowers from the obligation to repay any deficiencies.
Short Sale closings are handled in the same fashion as a traditional real estate closing. Before the Short Sale is accepted and the transaction is completed, the seller should consult with a tax advisor regarding the possible tax implications of a Short Sale.
Lender(s) do not normally outright refuse to accept a Short Sale. However, they may propose different terms or make a counteroffer if they are dissatisfied with the buyer’s offer. This is when The Andora Group goes into full gear in the facilitation process, as all parties must find common ground or the property will go into foreclosure. The only time a Short Sale offer is normally rejected in its entirety is when the offer is unrealistically low or the mortgage insurance on the loan will pay the investor more than they would recoup through the Short Sale process.