Massachusetts Short Sales
Things You Want and Need to Know About Massachusetts Short Sales
For those of you who have been hearing the term “short sale” and don’t quite understand what it means, a short sale is a lender-approved solution designed to assist those homeowners who are financially strapped to get out from under their mortgage debt through the sale of their property.
A short sale is negotiated through the mortgage holder of the property whereby the mortgage holder agrees to take less than what owner owes on the property.
An example of a short sale would be if a homeowner owes $500,000 on their current mortgage and their home is only worth $450,000, the lender would agree to take a short fall of $50,000 at closing. In many cases the mortgage holder may completely wipe out the debt and the home owner does not have to repay the $50,000. It needs to be emphasized that the debt is wiped out in many, but not all, cases. Some lenders may require a seller who has the ability to pay sign a note and repay the debt over a certain amount of time.
The homeowner benefits in this situation because they get out of a sticky financial mess without going to foreclosure, which can seriously damage their credit rating. Generally speaking when property is foreclosed upon the property owner will not be able to get a loan to buy another piece of real property for five to six years. With a short sale, in most cases the seller will be able to buy another property in two to three years.
You may be thinking “Why would a mortgage holder want to allow a short sale”. There are a number of reasons, most notably, the cost involved for the lender going through a foreclosure proceeding. In Massachusetts the mortgage holder, when all is said and done, can easily spend $40,000-$50,000 going through a foreclosure. Allowing a short sale can save the lender money they would otherwise lose.
With property values continuing to drop in Massachusetts, more and more lenders will consider the short sale as an option.
It is important to remember that banks are not in the business of owning real estate in their portfolios and would much rather assist a homeowner than to take ownership of their home. With a short sale in place, the lender is going to avoid carrying costs as well as a myriad of legal fees.
In order to do a short sale there must be some kind of provable financial hardship. Just wanting to walk away and get a cheaper house is not a reason to ask for a short sale, and most likely the lender will deny the short sale request.
This is not intended to be legal advice and not to be taken as such. For answers to questions on legal matters, please consult your attorney.
So what are some valid reasons for a short sale that a bank may accept? Here are a few: Loss of job, loss of income, divorce, death of spouse, business failure, relocation, military service, large medical bills and others. If there are other assets in place that could satisfy the debt the lender may also not comply with a short sale.
As a Realtor representing a seller in a short sale scenario there some issues you need to be aware of as well. See Ethics in a short sale for an explanation.
When selling your home or condo and you know you are going to be faced with a short sale make sure you choose to work with a good Massachusetts Realtor who has some working knowledge of short sale procedures! Short sales are very complicated transactions and hiring a Realtor that knows what they are doing is critical to your success. Remember as a seller you are not that far away from a potential foreclosure so picking the wrong Realtor would be a very big mistake to make.
A good Real Estate Attorney in your corner who works with short sales is also an important consideration for you to make. The Attorney will work on your behalf to be sure that you get all your legal rights. They collect all of your financial information, your earnings, tax forms, hardship letters, Hud1, etc. Due to time constraints ( if the property dose not sell, it will be foreclosed on by the bank) I choose not to do any of negotiating with the banks and have my short sale attorney do this all for us, you the client and me the Realtor. I pride myself on giving my Real Estate clients exceptional service. My business would suffer if I tried act as the Attorney. The time involved with doing what is necessary negotiating a short sale is very time consuming and every step has to be done correctly.
What you will be asked to provide
In order to complete a short sale the banks loss mitigation department is going to ask for many of the following documents:
• A completed authorization form allowing communication directly with your lender.
• Your lenders name, account numbers, and customer service phone number.
• A hardship letter discussing the exact reasons why you are not able to pay the mortgage going forward. This letter must be dated and signed.
• A copy of the listing agreement from the Real Estate agent.
• Proof of income ~ The lender is going to require a financial statement including copies of at lease two of your most recent bank statements, copies of your last 4 pay stubs, or if you are self employed, a copy of your most recent profit and loss statement. Lastly you will need copies of your last two tax returns.
• Also are there any other debts on the home or condo such as past due water and sewer bills, condo fees, outstanding taxes, IRS or other liens.
As a buyer wanting to purchase a short sale property there are a few things that you need to be aware of. One of the biggest drawbacks to purchasing a short sale is that most of the time they take a very long time to get a response from the bank. On average you can expect to be waiting three or four months just to hear if your offer has been accepted by the bank. There are some lenders, most notably Bank of America (BOA) where it is not unusual to wait six months to a year to get a response! If waiting that long is not what you want to do I would consider buying a bank owned home.
There are many that wonder why short sales take so long? The answer is that with the Real Estate collapse around the country most lenders are not properly staffed to handle the volume of short sales that they have. Many lenders don’t have the funds to provide additional staffing either. Most negotiators have piles and piles of files stacked up on their desks. It is a nightmare for those involved!
In most cases calling everyday to the negotiator asking for a decision is a big mistake. Every contact you make to the loss mitigation call center or the negotiator gets logged into their contact database. If you are calling too often you will likely get them upset. Doing that could cause them to reject the proposal or bury the file and no one would know why. One really important consideration is that in many circumstances the short sale negotiator is not the one making the decision for approval or not. The loan is owned usually by a secondary market investor (SMI). The so called short sale negotiator negotiates very little and is merely a processing clerk. Having these people on your side is important. You want them to go to bat for you with the investor. This is one of reasons to have the short sale Attorney on the seller’s side, and is why when I work with sellers doing short sales, I use the one who I use it is what she does.
Obviously if you are a buyer and are going to be waiting that long just to hear if your offer was accepted or rejected you better be getting a heck of a good deal!!
One of my biggest pet peeves with short sales is when a Realtor signs up to handle one for a seller and they do not know what they are doing. For example, the proper way to handle a short sale transaction is just like any other when it comes to accepting an offer. The seller should be approving an offer and signing the contract!
There are agents that are marketing short sales and collecting multiple offers and submitting all of them to the bank. There is no mechanism that holds a buyer in the deal. A buyer can walk at any time. This is an obvious down side for a seller as theoretically all of them could walk prior to getting approval. This is not what a bank likes to see either they want a signed legal Purchase and Sales Agreement.
There are Realtors that think they can collect all the important finical information and do all the negotiating with the lender by themselves, this is a very hard job to do as a working Realtor.
When it is a free for all with no offer accepted by the seller, a buyer does not have any security in the property either. A seller doing a short sale should be looking to lock up the best qualified buyer that has the greatest success in getting to the closing table. The buyer should be ready willing and able to close within 30 days after the bank accepts the offer. This means as a buyer you should make sure your financing is in place.
As a buyer you should be aware that the seller should not be accepting a ridiculous offer that has no chance of getting approved by the bank. The bank will send out an appraiser to verify that the offer is in the ball park of fair market value.
As you can see there is a quite a bit to know about short sales in Massachusetts!
Thinking of buying or selling a short sale property or other Real Estate in the Attleboro Area, Attleboro. Berkley, Dartmouth, Dighton, Easton, Freetown, Mansfield, North Attleboro, Norton, Raynham, Rehoboth, Seekonk, Swansea, Avon, Foxboro, Franklin, Norfolk, Plainville, Sharon, Walpole, Wrentham, Bridgewater, East Bridgewater, West Bridgewater, Lakeville, Middleboro? Please get in touch I would love to interview for the chance to represent your best interests.
If you are selling your home in Massachusetts and need to do a short sale or not, in one of the many towns I do not cover, I would be happy to refer you to a good Realtor who will be able to help you as I work with them. As a Jack Conway Realtor I also have the ability to refer you to a number of Realtors across the country and world to help you in all your real Estate needs.
I have been very successfully doing short sales in the Attleboro Area of Massachusetts. I work hand in hand with a local attorney who does all the negotiating with the bank. So far I have had tremendous success and have not had a short sale rejected by the bank.
If you or someone you know cannot afford their mortgage payments, consumer credit counselors generally suggest that you contact your lender and request enough time to list the property with a real estate agent and sell it.
If you are not too far behind on your mortgage payments, the lender may agree to what is known as a short sale. If not, then lender may choose to foreclose.
If the lender agrees to a “short sale” this means that the amount you receive for your home is less than what you owe the lender. Another way to think of it, is you go to the closing short of funds to close on the property. There are advantages to a short sale. In the case of a short sale, the lender agrees to accept the proceeds of the sale and forego the remainder of the loan balance. By accepting a short sale a lender can avoid a lengthy and costly foreclosure and the home owner is able to pay off the loan for less than they owe and since this is not a foreclosure, it may not have the potentially devastating effects on a credit score that a foreclosure will cause.
If you or someone you know might consider a short sale as a good option for selling property or are interested in purchasing a property in a short sale, I am here to help you. I have a very successful history of assisting sellers and buyers in our community with this circumstance. To learn more about how I can assist you or someone you know, call me today at 508-212-6511