A short sale is when the proceeds to sell the house fall short of the amount to pay off all of the mortgages on the property. For example, if one was to sell the house for $200,000.00 and the balance of the first mortgage is $150,000.00 and the balance of the second mortgage is $60,000.00, then the two mortgages added together ($210,000.00) is greater than the sales price of $200,000.00 and is therefore considered a short sale. However, if the property sells for $200,000.00, and the mortgage is $195,000.00, then it is not consider a short sale, even if the realtor fees and conveyance fees added to the payoff of the mortgage is greater than the sales price of $200,000.00.
A bank does not have to agree to a short sale of the property. They can (1) demand the full amount due, (2) take a partial payoff and give an unsecured Note for the difference or (3) foreclose on the property if payments were not made on the mortgage. Each bank may have a different process in negotiating a short sale but most request the following:
- Hardship letter explaining why a person is no longer able to make the payments and will not be likely to continue to make payments;
- Many banks do not consider a short sale until borrower has missed payment(s);
- Completion of a financial affidavit by all parties on the loan;
- A contract for the sale of the property;
- An appraisal of the property performed by the short selling bank;
- Arms-length transaction affidavit that states the buyer and seller are not related and it is an honest transaction; and
- The Seller does not receive any money at closing.
These are some of the more prevalent requests but they are not all of them nor does every bank make them all requirements.
Kukk Law Office can aid the Seller in submitting the short sale documents and closing the sale after short selling bank approved the sale. We have successfully closed many short sales on behalf of many clients. The short selling bank will pay the Seller’s attorney fee at closing. If you have questions or inquiries into short selling a property, please do not hesitate to contact us.