Catch-22 Pricing for Short Sales
Some lenders want to see MLS history that shows that the property has been on the market at fair market value prior to a listing that has been discounted 25 or 30%. The belief is that the property should have been introduced to the market as a regular sale first then as a short sale. Two issues arise from this. Most homeowners do not want their home on the market while they are working on a loan modification. By the time the homeowner receives the news that a work-out plan is not an option, the foreclosure process has already gotten started. That leaves the listing agent with very little time to market the property at fair market value. Especially in this housing market.
We have encountered dozens of homeowners throughout that past 2 years in the above scenario. Getting a lender to postpone proceedings in light of a new short sale listing is not a good business decision on the part of the lender. Even if a sale is not desired, homeowners should talk with an experienced agent about a short sale listing while working on a loan modification. Some loan modifications can take weeks and then the answer is no. Numbers are numbers. Ask the lender what are the ratios needed to even do a loan modification along with income requirements. Chances are, if you are one of the borrowers on the loan has had a decrease in employment or loss of employment, a loan modification will not be offered to you. Other work out plans such as a forebearance, will allow you to go a certain amount of time making reduced payments or without making any repayment on a loan. To qualify for a forbearance a lender will want to see that you will be able to resume payments at some point in the near future.
Property Liens and Preliminary HUD/Net Sheet
Lenders need to have all the facts when a property is sold short. That includes a properly prepared net sheet just as one is prepared by an attorney for a regular transacted real estate sale. This should include any taxes due on the property, commissions to agents, and most importantly any existing liens on the property. An existing lien unknown until closing can kill a short sale deal. Contrators who have not received payment, outstanding IRS liens, etc.. need to be on the net sheet and subtracted from proceeds if the seller is insolvent, unable to meet debts. Funds may have to come from the agent or agents, homeowner or buyer should a lien arise prior to closing. Most short sale acceptance letters specify a range of proceeds that the lender is expecting. If the lien is large and out of range to be paid by the proceeds, the short sale may not happen.
If you are interested in short sales for purchase or for your property, please request information here.
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