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Pat Lopez and Associates Team

The Truth About Short Sales

In light of the change in the residential real estate market in the past few years, many homeowners have found themselves overwhelmed with trying to fight off foreclosure from their lender and mortgage company. It is unfortunate that so many homeowners walk away from their mortgage upon receiving a Notice of Default from their lender when they do have an option to save themselves from foreclosure through a short sale.

What is a Short Sale?

A short sale is a process by which a seller sells his home for less than what he owes to the mortgage company. For example, let’s say a seller’s mortgage loan balance is $600,000, but homes in his neighborhood are valued at $450,000. That’s a $150,000 negative difference in his loan-to-value (LTV) ratio. If the seller is not in a position financially to continue his mortgage payments until the market recovers to the point where his home is worth more than his loan, he may face foreclosure. Under certain circumstances, the lender will allow the seller to “short sell” his property in order to avoid a foreclosure. In a short sale, the closing costs usually paid by the seller will instead be paid by the lender who holds his mortgage loan.

What are the Requirements for a Short Sale?

First and foremost, the home's equity value must be less than the loan value itself. Second, the homeowner will have to prove financial hardship in order for the mortgage company to authorize a short sale of the property. Usually the homeowner will have had to first try and make arrangements with the lender to make good on his loan either through a loan modification or repayment plan, and it is strongly suggested that homeowners try to work out a solution with the lender first prior to attempting a short sale. Many lenders will do their best to work with homeowners on a solution prior to filing a Notice of Default or authorizing a short sale, so it is worth making contact with the lender first to see if you are eligible for a viable solution. Financial hardship must be documented and records such as tax returns, bank statements, unemployment authorization, and other financial information may be required by the lender, as well as a clearly written hardship letter.

What Should a Homeowner Do to Short Sell Their Home?

The first (and best) thing to do is to contact a real estate agent in your area who specializes in residential real estate short sales. You can do so by locating real estate agents with a CDPE® (Certified Distressed Property Expert) designation. A Certified Distressed Property Expert® is a real estate professional with specific understanding of the complex issues confronting the real estate industry, and the foreclosure avoidance options available to homeowners. Through comprehensive training and experience, CDPEs are able to provide solutions for homeowners facing hardships in today’s market, specifically short sales.

How Much Does a Short Sale Cost?

Usually a short sale will cost the homeowner nothing out of their pocket. All costs and fees usually associated with the sale of a property will be covered by the homeowner’s lender upon authorization of the short sale, including escrow fees, title fees, and real estate agent commissions. Contact your Certified Distressed Property Expert for details.

How does it Work?

Your real estate agent will list your home using a standard listing contract at fair market value. You will usually be given other paperwork relating to the short sale that you will need to fill out as well. This may include financial details and a hardship letter to provide the lender. Upon receiving an offer from a potential buyer of your home, the lender reviews all of the information including seller’s financial profile and buyer’s qualifications and will either accept the buyer’s offer to allow escrow to open, or they may require more information for review. Upon acceptance by the lender, escrow proceeds as usual.

How Long does a Short Sale Take?

Short Sales vary in time based on many factors including obtaining an offer from a potential buyer, lender review of all documents prior to opening escrow, and the escrow process itself. They can typically vary from 3-6 months in length or longer.

I Received a Notice of Default. Is it Too Late for a Short Sale?

In many cases it is not too late. Unfortunately many lenders will not notify the homeowner of a Notice of Default until it is attached to their front door a few weeks before the foreclosure sale date. It is important to maintain contact with your lender if you are falling behind in your mortgage payments. In many cases a Notice of Default will be ordered when a homeowner is 90 days past due on their mortgage, however it can still be a few months before the house will go to auction. If you are 90 days past due and have not received any notifications of foreclosure from your lender, contact them to find out if they have filed a Notice of Default. Do not delay as this can seriously affect the outcome of your future!
In most cases however, even if you have received a Notice of Default from your lender it is not too late to short sell your property. Contact your Certified Distressed Property Expert immediately to have your questions answered and to have them help you stop the foreclosure sale of your property by the bank. Time is of the essence, but many times the bank sale can be delayed while you try to short sell your property.

Who Do I Contact For Short Sale Information?

Patrick Lopez is Realtor/Owner of Keller Williams VIP Properties in Santa Clarita. They are one of the fastest growing Keller Williams franchise offices in company history. Patrick has been a licensed full-time Real Estate agent since 1989 and has experienced all aspects of the ever-changing market. As the real estate market is constantly evolving, Patrick feels it is important to choose a real estate team, which is constantly implementing the latest marketing and service techniques to successfully market and negotiate properties.

Patrick Lopez & Associates goal is to fully satisfy their clients with first-rate service and help them realize the successful sale and/or purchase of their dream property. Patrick's personal team offers an environment that includes industry leading technology and education to their clients. The end result...providing higher level of service and a strong win-win environment. Patrick Lopez & Associates is proud of their commitment to making sure their clients are among the best served in the Real Estate industry today.

Our team members  are Pre-Foreclosure Specialists and Certified Distressed Property Experts® who have been trained to compassionately and discreetly help those in need who may be facing foreclosure.

If you or someone you know may be facing foreclosure, or if you have questions about the short sale process, please contact Patrick Lopez and Associates. We’re here to help.

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