Who Qualifies for a Short Sale?
Anyone owing more then their home is worth, facing a financial hardship with their current mortgage payments.
Build Your Short Sale Case
Once you’ve decided a Short Sale is a good option, there are several items you’ll need in order to “Build Your Short Sale Case.” While each lender is different you’ll typically need:
• Last 2 years tax returns & W-2’s
• Last 2 paycheck stubs
• Copies of the most recent Checking an Savings account statements
• Copies of any past due notices, liens, credit card bills, etc.
• A hardship letter stating your case.
A letter to the bank written in your own words either handwritten or typed. It should contain a list of events the occurred causing the inability to pay the mortgage and the steps taken in order to resolve the problem and their outcome. Do not misrepresent or exaggerate the situation.
• A copy of the MLS listing (Lenders want to see there’s been an effort made to sell
the home on the open market.)
Keep in mind that you are “Building Your Short Sale Case” and while the information listed above is typical to most shirt sale transactions, the more information the better. You’re trying to convince the bank that it’s in their best interest to accept a short sale. Other information that may useful:
• Delinquent bills (Utility etc)
• Pictures of the surrounding area
• A community report regarding crime etc.
• Proof of loss of job
• Pictures of problem areas of the home
• Articles relating to real estate in the area: i.e., rents down, prices falling, crime on the rise
Once d the short sale has been presented to the lender(s) for an approval, the lender will usually order a BPO (Broker Price Opinion) or an actual appraisal. The bank is trying to determine if the offer that’s been submitted is a fair offer.
The last step in a short sale is the decision from the lender. While the numbers are generally kept a secret, most lenders have a bottom line net figure they’re looking for in comparison to the cost of REO. The final decision belongs to the lender and they may accept, reject, or counter your offer. Be patient, this may take a long time.
Get Tax Help!
If your short sale offer is accepted, the result will be debt relief. The lender may file a 1099 form to the borrower for the amount the loan was shorted. Depending in the loan was a non-recourse loan or not, debt relief is usually considered taxable income
in the eyes of the IRS and may have significant tax liability for the seller. (Note: Bankruptcy by the borrower may relieve them of the tax liability) Capitol gains may also be a byproduct of short sales, depending on the sale price vs. the loan balance on the property.
