Download - 1 The Short Sale Process What is a Short Sale? What is a Short Sale? Who Qualifies For a Short Sale? Who Qualifies For a Short Sale? What are the Benefits.

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The Short Sale ProcessThe Short Sale Process

What is a Short Sale?What is a Short Sale?

Who Qualifies For a Short Sale?Who Qualifies For a Short Sale?

What are the Benefits of a Short Sale?What are the Benefits of a Short Sale?

What Documents Are Required?What Documents Are Required?

What are the Benefits to AttorneysWhat are the Benefits to Attorneys??

What is Expected in the Process?What is Expected in the Process?

Answers to Frequent QuestionsAnswers to Frequent Questions

REAL ESTATE MITIGATION PROFESSIONALS, LLCREAL ESTATE MITIGATION PROFESSIONALS, LLCShort Sale SpecialistsShort Sale Specialists

Our Presentation Today Will Address the Following: Our Presentation Today Will Address the Following:

What are a Distressed What are a Distressed Homeowner’s Options?Homeowner’s Options?


What is a Short Sale?What is a Short Sale?

• The property may be over-leveraged or “underwater”The property may be over-leveraged or “underwater”

• The property owner may be behind on mortgage payments & cannot sell The property owner may be behind on mortgage payments & cannot sell for high enough to cover what you owe plus other required fees to close.for high enough to cover what you owe plus other required fees to close.

• A short sale is an alternative to foreclosureA short sale is an alternative to foreclosure

• Foreclosing on properties always costs lenders money: Foreclosing on properties always costs lenders money: – Attorney’s Fees, Taxes, Insurance, Winterization, Vandalism, Attorney’s Fees, Taxes, Insurance, Winterization, Vandalism,

Weather Damage, Stigma of being REOWeather Damage, Stigma of being REO

A Short Sale is when the lender(s) and/or lien holder(s)A Short Sale is when the lender(s) and/or lien holder(s)agree to take agree to take lessless than is owed than is owed

so the property can be sold. so the property can be sold.


Who Qualifies?Who Qualifies?

• Experiencing a true financial hardshipExperiencing a true financial hardship

• Be in default on the mortgageBe in default on the mortgage

• Facing imminent default while in a ‘Must Sell’ situationFacing imminent default while in a ‘Must Sell’ situation

• NO Equity in the homeNO Equity in the home

• NO available assetsNO available assets

In General – to Qualify, the Seller usually is or has: In General – to Qualify, the Seller usually is or has:


Who Qualifies?Who Qualifies?

Most people facing foreclosure or a financial hardship Most people facing foreclosure or a financial hardship who cannot sell their home for what is owed who cannot sell their home for what is owed

should qualify for a short sale.should qualify for a short sale.

Each lender & loan type has a different set of requirements: Each lender & loan type has a different set of requirements:

– This information can be found on a current mortgage statement This information can be found on a current mortgage statement or the settlement papers from the previous closing. or the settlement papers from the previous closing.


The Benefits of a Short The Benefits of a Short SaleSale

• NO Foreclosure on CreditNO Foreclosure on Credit

• Generally NO money needed to close Generally NO money needed to close

• NO repairs necessary – Sell AS-ISNO repairs necessary – Sell AS-IS

• NO taxable event for those that qualifyNO taxable event for those that qualify

• NO deficiency judgment if negotiatedNO deficiency judgment if negotiated

• Out from underneath your mortgage debtOut from underneath your mortgage debt

• NO Need to file bankruptcyNO Need to file bankruptcy

• A positive step towards home ownership in only 2 yrs.A positive step towards home ownership in only 2 yrs.


The PaperworkThe Paperwork

• Handwritten & Signed Hardship LetterHandwritten & Signed Hardship Letter Explain the situation, when it started, how it happened & what is being done to fix itExplain the situation, when it started, how it happened & what is being done to fix it

• A Financial WorksheetA Financial Worksheet Everything that is spent on a monthly basisEverything that is spent on a monthly basis

• 2 Years Most Recent Tax Returns2 Years Most Recent Tax Returns With W-2s & all schedulesWith W-2s & all schedules

• 2 Months Recent Bank Statements2 Months Recent Bank Statements All accounts & all pagesAll accounts & all pages

• 2 Most Recent Pay-Stubs2 Most Recent Pay-Stubs Or, if unemployed, a statement stating suchOr, if unemployed, a statement stating such

The Lender Will Require a Minimum of the Following:The Lender Will Require a Minimum of the Following:


The PaperworkThe Paperwork

• An Authorization to Release Information aka. “3An Authorization to Release Information aka. “3rdrd Party Authorization” Party Authorization” • Copy of recent mortgage statement(s)Copy of recent mortgage statement(s)• Copy of any correspondence received regarding the property Copy of any correspondence received regarding the property from attorneys, lien holder(s), bankruptcy trustee, or probate.from attorneys, lien holder(s), bankruptcy trustee, or probate.• Any paperwork regarding any other liens and/or judgments.Any paperwork regarding any other liens and/or judgments.• Property tax recordsProperty tax records• Information about any Home Owner’s Association & any outstanding Information about any Home Owner’s Association & any outstanding

HOA dues owed by the SellerHOA dues owed by the Seller• Information about any outstanding assessment/s on the propertyInformation about any outstanding assessment/s on the property• Negotiation Disclosures signed & datedNegotiation Disclosures signed & dated

To Communicate With the Lender, We Require the Following:To Communicate With the Lender, We Require the Following:


Pending Foreclosure Pending Foreclosure Date?Date?

URGENT MESSAGEURGENT MESSAGE

If a property is scheduled for a foreclosure sale date, If a property is scheduled for a foreclosure sale date, be sure that you contact the Lender immediately.be sure that you contact the Lender immediately.

Lenders would rather postpone over 95% of the time than Lenders would rather postpone over 95% of the time than to get the property back. This can be achieved without to get the property back. This can be achieved without

filing for Bankruptcy. filing for Bankruptcy.


The NARThe NAR®® Supports Supports Short SalesShort Sales

November 9, 2008November 9, 2008

““Short Sales give many families in financial difficulties Short Sales give many families in financial difficulties the possibility of salvaging their credit & avoiding the the possibility of salvaging their credit & avoiding the embarrassment of a foreclosureembarrassment of a foreclosure. Realtors. Realtors®® across across the country stand ready to help, & NAR will work the country stand ready to help, & NAR will work

hard to ensure that short sales are a viable hard to ensure that short sales are a viable alternative to foreclosures whenever possible.”alternative to foreclosures whenever possible.”

- National Association of Realtors- National Association of Realtors®® President Richard Gaylord President Richard Gaylord


The Benefits to You, the The Benefits to You, the AttorneyAttorney


Homeowners in distress need solutions Homeowners in distress need solutions from Attorneys because you:from Attorneys because you:

Will protect their interestsWill protect their interests

Have specialized skills Have specialized skills

Maintain high ethical standards & integrityMaintain high ethical standards & integrity

Offer Win-Win solutions like Short SalesOffer Win-Win solutions like Short Sales

What to Expect?What to Expect?

1.1. Property is Listed & Seller Documents Are CollectedProperty is Listed & Seller Documents Are Collected

2.2. Sales Contract Signed Sales Contract Signed

3.3. You Submit the Short Sale PackageYou Submit the Short Sale Package

4.4. The Lender Orders BPO and/or AppraisalThe Lender Orders BPO and/or Appraisal

5.5. You Undergo Negotiations with LenderYou Undergo Negotiations with Lender

6.6. You Receive Approval From LenderYou Receive Approval From Lender

7.7. Title Work is Ordered & CompletedTitle Work is Ordered & Completed

8.8. Property is SoldProperty is Sold

The Process often takes 3-4 months The Process often takes 3-4 months or longeror longer to complete. to complete. Patience & Communication are the Keys to Success!Patience & Communication are the Keys to Success!


What is a Basic What is a Basic Timeline?Timeline?

• Get authorization on file with lenderGet authorization on file with lender 2 days2 days

• Compile short sale documentsCompile short sale documents 7-14 days7-14 days

• Get short sale package on file with lenderGet short sale package on file with lender 3-7 days3-7 days

• Short sale package assigned to negotiatorShort sale package assigned to negotiator 10-14 days10-14 days

• Get BPO/Appraisal orderedGet BPO/Appraisal ordered 14-21 days14-21 days

• Schedule BPO/Appraisal with agentSchedule BPO/Appraisal with agent 5-10 days5-10 days

• Time for BPO/Appraisal to get to negotiatorTime for BPO/Appraisal to get to negotiator 21-28 days21-28 days

• Negotiate & obtain approval from negotiatorNegotiate & obtain approval from negotiator 15-20 days15-20 days

• Total:Total: 77-104 days77-104 days

This timeline is in no way accurate for every lender. Some lenders are expeditious, This timeline is in no way accurate for every lender. Some lenders are expeditious, others are buried with thousands of short sales & pending foreclosures. others are buried with thousands of short sales & pending foreclosures.

FNMA, FDMC, FHA etc. expand this timeline & often work on their own schedules.FNMA, FDMC, FHA etc. expand this timeline & often work on their own schedules.


There Are No There Are No GuaranteesGuarantees

As with any real estate transaction, As with any real estate transaction,

there are No Guarantees.there are No Guarantees.


Short Sale Success is Based Upon: Short Sale Success is Based Upon:

Stopping and/or Postponing a Pending Foreclosure Stopping and/or Postponing a Pending Foreclosure

Cooperation from any & all Lien Holder(s)Cooperation from any & all Lien Holder(s)

Cooperation from & between the Seller & Buyer.Cooperation from & between the Seller & Buyer.

Common MistakesCommon Mistakes

• Assuming that the short-sale process is easy & fastAssuming that the short-sale process is easy & fast

• Listing a property for an amount to cover full payoffListing a property for an amount to cover full payoff

• Not understanding that most lenders have a fixed Not understanding that most lenders have a fixed minimum percentage of the BPO they will acceptminimum percentage of the BPO they will accept

• Not preparing for the crucial interior BPONot preparing for the crucial interior BPO

• Allowing the BPO to be done without being presentAllowing the BPO to be done without being present

• Sending incomplete short-sale packagesSending incomplete short-sale packages

• Not being patient & persistent with lendersNot being patient & persistent with lenders

• Not knowing how to negotiate with lendersNot knowing how to negotiate with lenders


Why Are We the Best Why Are We the Best Decision?Decision?

We Know the St. Louis MarketWe Know the St. Louis Market

Your Local TeamYour Local Team

We Know How to Negotiate with LendersWe Know How to Negotiate with Lenders

We Are Obligated to Protect Your InterestsWe Are Obligated to Protect Your Interests

Of Files Accepted, Over 95% Completion RateOf Files Accepted, Over 95% Completion Rate

Wholesale & Retail Short Sale StrategiesWholesale & Retail Short Sale Strategies


How Are We Paid?How Are We Paid?

By the Investor Purchasing the PropertyBy the Investor Purchasing the Property

A Fee Agreement Between REMP LLC and/or A Fee Agreement Between REMP LLC and/or

the Listing Brokerage, Interested Partiesthe Listing Brokerage, Interested Parties

Directly By the Lender Directly By the Lender


Wholesale Short Sale Wholesale Short Sale StrategyStrategy


Retail Short Sale Retail Short Sale StrategyStrategy


F A QF A QHow much time is left? Do I have to start now?How much time is left? Do I have to start now?

It is best to begin a short sale when you realize you can no longer afford the mortgage. It is best to begin a short sale when you realize you can no longer afford the mortgage. Missouri has a very short time period between notification & foreclosure. The earlier the Missouri has a very short time period between notification & foreclosure. The earlier the process is started, the higher the likelihood of a successful short sale.process is started, the higher the likelihood of a successful short sale.

Does the homeowner need to be in default to qualify for a short sale?Does the homeowner need to be in default to qualify for a short sale?NO. More and more lenders are considering short sale requests from homeowners who NO. More and more lenders are considering short sale requests from homeowners who are not in default. However, the individual must be experiencing a financial hardship that are not in default. However, the individual must be experiencing a financial hardship that points to imminent default if unable to sell. points to imminent default if unable to sell.

What is better on my credit – Foreclosure or Short Sale?What is better on my credit – Foreclosure or Short Sale?Please consult your own financial advisor or the credit bureaus directly for the answer to Please consult your own financial advisor or the credit bureaus directly for the answer to this question. From experience only, we can say that foreclosure is much more this question. From experience only, we can say that foreclosure is much more damaging to your credit. A short sale will most commonly be listed as “settled debt” and damaging to your credit. A short sale will most commonly be listed as “settled debt” and is much less harmful to your credit.is much less harmful to your credit.


F A QF A Q

Will the homeowner get any money when the property sells?Will the homeowner get any money when the property sells?Maybe. The vast majority of loan types do not allow the seller to receive any proceeds Maybe. The vast majority of loan types do not allow the seller to receive any proceeds from the sale of the property. If the property is secured by an FHA loan, the seller may from the sale of the property. If the property is secured by an FHA loan, the seller may qualify for their pre-foreclosure sale program that does have a selling incentive. Other qualify for their pre-foreclosure sale program that does have a selling incentive. Other Federal Government programs encouraging a homeowner to sell are forthcoming… Federal Government programs encouraging a homeowner to sell are forthcoming…

What if the homeowner files bankruptcy?What if the homeowner files bankruptcy?Filing bankruptcy will not stop the foreclosure process, just delay it. Filing bankruptcy will not stop the foreclosure process, just delay it.

The property will eventually be discharged from bankruptcy protection and be back in The property will eventually be discharged from bankruptcy protection and be back in the foreclosure process where it was when bankruptcy was filed. For further the foreclosure process where it was when bankruptcy was filed. For further bankruptcy information, please seek the advice of legal counsel.bankruptcy information, please seek the advice of legal counsel.


F A QF A QWhat is a deficiency judgment?What is a deficiency judgment?

Any amount between what the property sells for and what is owed to the lender is called Any amount between what the property sells for and what is owed to the lender is called a deficiency. If this amount is a large amount of $$ and the homeowner has significant a deficiency. If this amount is a large amount of $$ and the homeowner has significant assets, the lender may pursue a ‘deficiency judgment’, a legal instrument that allows the assets, the lender may pursue a ‘deficiency judgment’, a legal instrument that allows the lender to file a law suit and pursue that homeowner for the amount owed. lender to file a law suit and pursue that homeowner for the amount owed.

Depending on your situation you may or may not receive a deficiency judgment or Depending on your situation you may or may not receive a deficiency judgment or taxable event. In Missouri, a deficiency judgment is possible, however it is extremely rare taxable event. In Missouri, a deficiency judgment is possible, however it is extremely rare for a lender to pursue a deficiency. The loss for a lender is a tax write-off, so once the for a lender to pursue a deficiency. The loss for a lender is a tax write-off, so once the loss has been accounted for, the lender cannot pursue a judgment. loss has been accounted for, the lender cannot pursue a judgment.

Will I be liable for my lender’s financial loss?Will I be liable for my lender’s financial loss?The deficiency is considered by the IRS to be phantom income and the lender is required The deficiency is considered by the IRS to be phantom income and the lender is required to issue a 1099C to the homeowner. to issue a 1099C to the homeowner.

According to the Mortgage Forgiveness Act of 2007, any deficiency on a homeowner’s According to the Mortgage Forgiveness Act of 2007, any deficiency on a homeowner’s primary residence, up to $1 million, is forgiven by the IRS from now until 2012. primary residence, up to $1 million, is forgiven by the IRS from now until 2012.

It is best to consult an attorney or financial advisor for advice regarding any debt liability. It is best to consult an attorney or financial advisor for advice regarding any debt liability.


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F A QF A Q

What other advice should I seek?What other advice should I seek?Be smart. Always seek professional advice from a qualified attorney and an accountant Be smart. Always seek professional advice from a qualified attorney and an accountant specializing in Short Sales/Pre-Foreclosure Sales.specializing in Short Sales/Pre-Foreclosure Sales.

What about the federal government bailout programs?What about the federal government bailout programs?To determine your eligibility, please visit To determine your eligibility, please visit www.financialstability.gov

We make no assurances or guarantees as to the information contained We make no assurances or guarantees as to the information contained herein or the outcome for your property. herein or the outcome for your property.


http://www.financialstability.gov/