A Short Sale is when you need to sell your property but the amount owed exceeds the value of the property AND you are asking the lien holder (lender) to accept less as payment in full. You are asking your lender to accept a “short” payoff so you can sell and they can avoid the expense of a foreclosure.
For example: You bought your house in 2005 and paid $250,000 for it. You mortgaged $230,000. You can no longer afford to keep the house because of a legitimate hardship. You MUST sale or you will be foreclosed on.
The property is now only worth $200,000 (Market Value). Fortunately, you have a qualified Buyer willing to pay Market Value. After the expenses involved with selling the property there will only be $180,000 left over to pay the lender.
So you either have to bring $50,000 to closing OR ask the lender to accept a “short” of $50,000 ($230,000-$180,000=$50,000). If the lender agrees you have just completed a Short Sale.
****Next we will discuss “hardship".
In the meantime, if you have a property that needs to be sold as a Short Sale just send me a email and which bank has your loan and I’ll send a Short Sale Listing Package to you that conforms with your banks requirements.
lindamoran-re@earthlink.net
What is a hardship and why do I need one?
A Short Sale is one of several pre-foreclosure remedies. In order to request a Short Sale, from your Lender, you must have a hardship AND you have to be able to prove it. It has to be a legitimate hardship.
Noun
1. conditions of life that are difficult to endure
2. something that causes suffering
A hardship is anything that makes it where you can not afford the payments on your house. A hardship is something drastic that has happened to your financial situation since you borrowed the money. You borrowed the money and you agreed to pay it back. Now you can’t. Notice I said CAN’T….not WON’T. Can’t is a hardship. Won’t is a deadbeat.
A hardship may be the result of:
- Divorce
- Job loss
- Reduced income
- Illness
- Disability
- Medical bills
- Job relocation
- Military duty
- Incarceration
- Failed business
One of the key documents related to a short sale is the Hardship Letter. Whatever your hardship may be you will need to write a hand written letter telling your lender about it.
This outline will help you prepare your hardship letter. The sample answers are to assist you NOT to just be copied. Your hardship letter should only contain facts. Just be honest. Your goal is to explain to your Lender why you can no longer make the payments for your property. This letter should be handwritten and legible.
TO: Countrywide Mortgage
FR: Paul and Suzie Whoever
RE: 1234 Lost Value Ave. Poinciana ,WA 98277
LN#: 34578903
First Paragraph-Explain what you want.
- We are requesting that you approve us for a short sale of our loan with your Company.
- We are no longer able to make the payments and have been trying hard to sell the property.
- We love our home but due to circumstances beyond our control we are no longer able to pay for it.
Secondly, describe your hardship
- What led to your current financial problems and caused you to miss mortgage payments?
- What caused your hardship?
- Did you lose your job?
- Did your current job require a transfer?
- Illness?
- Death?
Be very specific. Remember you are trying to get your Lender to accept a loss. Be honest and be thorough.
Then describe what you have tried to do to overcome your hardship.
- Have you been to counseling?
- Have you been job hunting?
- Are you cutting back on your expenses?
- Have you been making mortgage payments on your credit cards?
Briefly outline your current situation.
- You have a new job but are making less money.
- You had to move due to divorce, job, children etc….
Provide your contact information.
- Let them know they are free to contact you if they have any questions BUT reiterate that they should contact your Broker.
Finally, sign and date the letter.
If you have a property that needs to be sold as a Short Sale just send me a email and which bank has your loan your address and phone and I’ll send a Short Sale Listing Package to you that conforms with your banks requirements.
lindamoran-re@earthlink.net
DISCLAIMER: I am a Washington Licensed Real Estate Broker. This article is my opinion based on years of experience. All Sellers are urged to seek competent legal and tax advice. I am NOT qualified to give advice in those areas.
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