Short Sales 

             Short Sales in Newport Beach, Laguna Beach, Irvine

It has come to my attention that many people may not know what a short sale is. Sure you see it mentioned in the news, but you may not know exactly what it is.  A short sale is option you have before you go in to foreclosure. The bank will take less than what you owe them on a mortgage. For example,  you bought a house for $800,000 and now the house is worth $750,000. The bank is willing to take $750,000 instead of $800,000. They will write off $50,000.  The bank would much rather take a loss here than go through a foreclosure. A foreclosure can take a long time. Foreclosure homes are many times trashed when the previous owner leaves. They figure if they can't have the house, no one else will either. Even though they were the ones late on their mortgage payment.  The value of the house may continue to go down over the course of a foreclosure.....costing the bank more money. So if you are thinking you are going to end up in foreclosure.....now is the time to be talking to the bank and a real estate agent about a Short Sale! Trust me, I have personal experience with a short sale. The hardest part is deciding to do a short sale. Don't wait too long, you may lose your window of opportunity. Many people are making the tough decision to short sale.....you are not alone if you are thinking about doing a short sale.

Credit Score Impact - If you choose to do a short sale, your credit score will be impacted between 80 and 100 points.  Choose to wait for the bank to take the house, you are looking at 180-250 point loss. This will greatly impact your credit score not allowing you to buy a house for many years. This will also impact your credit rate for buying cars, credit cards....or anything else you use your credit score for.

Realtor Fees /For Sale by Owners -  Are you trying to sell your house on your own so you don't have to pay commission and lose as much on your house. Don't worry about this, the bank will pay the realtors....sometimes up to 6%. Trust me, the bank does not want to hang on to this property very long.

Quick Short Sales - If you find a short sale that is bank approved, this short sale is ready to close quick. The bank is waiting for an offer, if they don't already have a couple offers in house. You are still able to negotiate price on this. If there are other offers in, you may not want to go too low.

Process -

Talk with the bank. You will want to make sure you are talking with the loss mitigation department. There are various names for this department....depending on the bank.

Contact tax accountant.  Broker/Realtor cannot give legal or tax advice.

Hire a good Realtor.  You will want someone that isn't afraid to call the bank everyday to follow up on the transaction. Remember, the squeaky wheel is always the first one oiled....or something like that. Once you have a Realtor hired, have them sign a California Association of Realtors contract Authorization to Receive and Convey Information along with a Short Sale Listing Addendum, and Listing Agreement.  Your realtor will have these forms. The Authorization to Receive and Convey Information will enable the realtor to talk directly to the bank. Make sure you are honest with your realtor. Which brings me to this point.......tell your realtor everything you know about your loan and situation. The Realtor will be able to pull a property profile through title....so make sure you don't surprise him or her with lack of information.   Information like liens and lis pendens are very important to disclose.  It 
 
Homework for the Seller. You will need the same information you used to apply for the loan.
1)  Tax returns for 2 years
2)  Two current pay stubs.......make sure they have year to date earnings on them. 
3)  Letter of hardship....explain how you got in to the financial trouble, ex. loan adjust or you lost your job. Be very specific. You may even want to make a spreadsheet outling costs verses incoming money I have examples if you want me to send one to you.
4)  Recent loan statement/coupon
5)  Address and account numbers for all loans
6)  Most recent bank statement.

This is off the record, the banks are receiving so many short sales right now, unless you are behind in payments, you probably won't be looked at as fast. You can draw your own conclusion on this point.

Price to Sell.  Your real estate agent will help you come up with a price to market the house for quick activity.

Accept Offer.  After you receive an offer, you will put all of your homework mentioned above, plus the offer in a package to fax to the bank. Most banks are only receiving faxes at this point. So don't mail this as it may not end up with the right department. Make sure it is faxed to a department specializing in loss.  Each bank will call this department a different name. Follow up with the bank as much as you can. It may take 2-3 months to get the approval.

Approval from Bank. Once you are approved, move forward with the transaction. Make sure you close before the expiration date on the approval letter from the bank. If the transaction doesn't go through, now you know what the bank will take. You may want to enter in to the MLS that now the short sale is approved.

That is Short Sale in a nutshell. Please let me know if you have any questions or if you need representation.