Short Sale Protocol
SHORT SALES – WHAT ARE THEY?
A short sale or short selling a home is where the homeowner is underwater (i.e. the amount owed on the home exceeds the value of the home). The shortage is the difference between the amount owed and the sale price. For example, if a home has a mortgage for $200,000.00 and the value of the home is actually closer to $100,000.00 and the homeowner wants to sell the home, the sale would be a short sale. Living in Port St. Lucie and Stuart, it is hard to escape hearing about short sales if you are in the market to buy or sell a home. If selling understand there are no guarantees and it does involve some work on your part.
First, you will have to get your home listed with a realtor. The list price will have to be for market value which means the realtor will usually conduct a CMA (Comparative Market Analysis) or a BPO (Broker Price Opinion) to determine the value of the home. The seller will also have to complete paperwork to support their financial position to justify why the bank should go forward with selling the home for a lesser value. This usually includes a hardship letter, an RMA form (which is a financial disclosure indicating your income/expenses and assets), bank statements, paycheck stubs and bank statements (2 to 6 months), income tax returns for usually 2 years, the IRS form 4506T, and a utility bill. This paperwork is submitted to the Bank with an offer accepted by the seller and the listing agreement. The accepted offer must be an arms-length transaction. This means the property cannot be sold to a family member, relative, or an individual which would raise suspicion as to the pricing and selling of the house.
The bank will review the paperwork and either accept, reject, or counter the contract. If accepting and waiving the deficiency, that is the best possible case. The letter sent from the bank will indicate their expected net and when the closing will need to take place. Rejection without a counter-offer could mean the bank is not interesting in short selling the home or the price is too low. A counter-offer could result in a change in the price of the contract, a request for contribution from the seller, or a request for contribution at closing. Regardless, it is important to make sure the deficiency amount is fully addressed and they you are fully aware of any and all liability associated with the debt and taxes for this transaction. Realtors are not attorneys and cannot advise you. They may think they can, but they are not lawyers. If you are facing any difficult financial situation in Stuart, Port St. Lucie or Jupiter FL, and need a lawyer who can help, please call my office.
The video below touches on what I have discussed here. Thank you and I look forward to hearing from you.