New York Real Estate

Short Sales Information


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A short sale in real estate is not always a pleasant transaction.

There are many ways to lose a home but signing away ownership in a manner that destroys credit, embarrasses the family and strips an owner of dignity is one of the hardest. For owners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or foreclosure  proceedings. One of those options is called a "short sale."

 Short sales is a hot buzz phrase. Some sellers who decide that their home wont sell at the price they had imagined often start to wonder if they should do a short sale. A short sale doesn't always solve problems, but it most assuredly can create problems. Short sales are not the "saving grace" some home sellers would like to believe.

 

What is a Short Sale?

A short sale happens when the lender is shorted on a mortgage, meaning the lender accepts less than the total amount that is due. If your mortgage is $100,000, but your home is worth, say, $90,000, you are $10,000 short, not including costs to close the sale such as real estate commissions, recording fees or title and escrow charges.

 

Qualifications for a Short Sale

Before you eagerly climb aboard the short sale bandwagon, consider the following to determine whether you may qualify for a short sale. If you cannot answer yes to all four requirements, you may not qualify for a short sale.

 

  • The Home's Market Value Has Dropped.

    Hard comparable sales must substantiate that the home is worth less than the unpaid balance due the lender. This unpaid balance may include a prepayment penalty.

     

  • The Mortgage is in or Near Default Status.

    It used to be that lenders would not consider a short sale if the payments were current, but that is no longer the case. Realizing that other factors contribute to a potential default, many lenders are eager to head off future problems at the pass.

     

  • The Seller Has Fallen on Hard Times.

    The seller must submit a letter of hardship that explains why the seller can not pay the difference due upon sale, including why the seller has or will stop making the monthly payments.

    A few examples that do NOT constitute a hardship are:

     

      1. Bad purchase decisions. Blowing your paycheck on a home theater system with surround sound does not qualify as a hardship.
      2. Unhappy with the neighbors.
      3. Buying another home. The lender will not care if you have decided the home is no longer suitable for you or your family.
      4. Pregnancy. Increasing the size of your family or starting a family is not considered a hardship.
      5. Moving into an apartment. If you decide to move out of your home, that is a lifestyle decision and not a very good reason to abandon your home.

     

      Examples of hardship are:

       

      1. Unemployment
      2. Divorce
      3. Medical emergency / sudden illness
      4. Bankruptcy
      5. Death

     

  • The Seller Has No Assets

    The lender will probably want to see a copy of the seller's tax returns and / or a financial statement. If the lender discovers assets, the lender may not grant the short sale because the lender will feel that the seller has the ability to pay the shorted difference. Sellers with assets may still be granted a short sale but could be required to pay back the shortfall.

 

 

Legal Disclaimers: NYRE, Inc. when acting as Loss Mitigation specialists merely convey information on behalf of Clients and Customers and make no representation of Legal advice. For all Legal and Law advice, please seek an attorney in your area. All advice given through NYRE, Inc. and it’s representatives is solely based on it’s years of experience in the Real Estate and Mortgaging fields.

Frances Franco