AZ Foreclosure Realtor

You may have heard about banks performing a short sale on your home. Or, that a Short Sale is an easy way for the bank to take less money than they’re owed, allowing you to avoid the foreclosure sale. I’m going to explain what a Short Sale is, how it works, and dispel some myths about them as well. I’ll educate you as to what is required in order for you to get a Short Sale started with the banks.

The Concept of Short Sales

A Short Sale is the process of a lender discounting what is owed on the Promissory Note in order for you to sell your home before the foreclosure sale. However, getting approval of a short sale is not as easy as just asking for it. If it was, our Real Estate Market would be completely different than it is now. There’s a ton of work that goes into getting it completed successfully. To a Lender, you and your home are just a number; it’s a numbers game to them. There are no ’special circumstances’. Much like the Banker in the Deal or No Deal game show, it all comes down to the numbers they have on their computer screen, and the carefully calculated odds.

You see, a Bank knows how much they believe your home to be worth. They know what your neighbor’s house sold for across the street last year. They have current pictures of the outside of your home, the condition of it, as well as the neighborhood it’s in. They know how much you owe on all of your mortgages. Most importantly, they know how much they can expect the house to go for at the foreclosure sale. Plain and simple- if they think they can get more for your home by taking it to auction, they won’t approve the short sale. Side note here- they can also pull your credit report and tax returns to see your current financial status- they have that right as you gave permission to them upon signing all of those papers when you initially applied for the loan.

For example- let’s say you owe $270,000 on your home, but you know your home is only worth $250,000. The bank told you the foreclosure auction is in 2 months. You may have an investor knocking on your door offering to buy the property for $150,000. If the lender believes they can get more than $150,000 at the foreclosure sale, then they won’t agree to the terms. However, let’s say you hire a Realtor® (know any good ones around here? ;)  ) and they bring you a buyer for $240,000, the bank just might accept the deal. The tricky part is that we never know what price they want, nor, will they tell us. Their job is to recoup as much money as possible, or in other words, lose as little money as possible. Most of the time they won’t tell us what price they need, and it’s all wrapped up in the midst of the negotiating process. Keep in mind that the process is much more difficult than this, I’m just using basic examples to illustrate the points.

The tough part is that the bank will rarely, if ever, accept a Short Sale initiated by the debtor. In my years of doing this business, I have never seen it happen. Plain and simple, the bank just doesn’t trust the debtor who is walking away from what they owe.  This is where the help of an experienced Real Estate Agent comes in handy. A Licensed Realtor® with extensive experience in foreclosures and short sales can greatly increase your odds of getting it completed. It is a tough, complicated process that can take many hours to complete- most Agents are not trained in foreclosures, and have never completed one before. You really need an experienced Realtor® who specializes in this process. And don’t worry, the bank actually pays for the Realtor’s fees, so it costs you nothing to hire one to represent you through this difficult time. The agent only gets paid when they sell your home, so you can be certain that a good one will work hard to complete the process.

Once the sale is completed, you are released from the foreclosure sale, which will have much less of an impact on your credit report than losing it to the auction. According to President Bush’s new law, you are also not responsible to pay taxes on the amounts the banks discounted. It really is a win-win solution for everyone involved (except the Realtor- they work harder, and the bank pays them much less commission to do the entire transaction).

 Details of the Short Sale Process

One of the biggest problems with getting a short sale completed is that you have to find a buyer for your home. If you haven’t heard by now, our real estate market isn’t exactly flooded with them. You’re competing with the 70,000+ other homes on the market for sale. The reality is that there’s just not that many buyers out there right now, so it makes it extra tough. Just like every other sellers out there, you need a buyer to make this nightmare go away. It can certainly happen, it just might take some extra hard work for your Realtor to find one who is in love with your home, and is willing to pay the right price.

Completing a short sale is a very lengthy process. As you may already know, your bank reps aren’t exactly easy to get a hold of. Your Agent can expect to spend HOURS every week on hold or leaving voicemails for them. I’ve had short sales last longer than 7 months start to finish, and they still didn’t get approved. However, the good news is is that many banks are willing to postpone the foreclosure sale if they know you might have a potential buyer at the table.

The Buyer must also have approved funding and be able to convince the bank that they are serious about the transaction. They can obtain an inspection, however, the bank will not pay for any repairs to the property to be made. So your buyer must be willing to purchase the home in ‘AS-IS’ condition. This is why most offers on a Short Sale are far below the value of the home, and interferes with the price the bank is willing to settle for.

Additionally, there is a mountain of paperwork the homeowner must turn into the bank, before they’ll even consider a short sale on the home. This can takes weeks for most homeowners to gather up and get over to the bank. They must then review the file to make sure you didn’t miss anything, and get an approval from management before proceeding. The lender will always prefer you to stay in the home, and become current on your payments as their first option. A short sale means that they are losing a lot of money, and that is always last resort for them. Once they’re convinced you’re not going to save the home, they’ll consider a short sale. Again, hiring an experienced Realtor® can assist you with this entire process, and it’s FREE to you! Please feel free to contact me to discuss your options of me working with you to complete a short sale on your home.

The Rules of Short Sales

1. The Homeowner must be delinquent on their mortgage payments- typically, a minimum of 2 months.
2. The Homeowner must provide proof of financial hardship.
3. The Homeowner must not net any money from the sale of the home. Not even 1 cent!
4. You must still find a qualified buyer for the home, one who is willing to buy the home in as-is condition.
5. The Homeowner must submit all required paperwork to the lender to start the process.
6. It is difficult for the Homeowner to complete the sale on their own, without a Realtor®
7. The Lender pays the Realtor’s fees and closing costs (if they pay anything at all!)
8. The Short Sale must net the bank more money than what they would receive from the foreclosure sale.
9. The Homeowner is not responsible to pay taxes on the amounts discounted by the lender.
10. The Bank cannot sue the homeowner for losses, assuming they are under the Homestead Exemption Statutes

 A Short Sale is a great solution to a foreclosure, if you can successfully complete it. There is a ton of work that goes into them, and you must have a lot of patience with the process. Hiring a Realtor who specializes in Short Sales and Foreclosures is your highest chance of getting one completed. It also provides you with the most protection possible, and is NO COST to you! That’s right, the Bank pays the fees for the transaction! If you are facing foreclosure in Arizona, please contact me to discuss your options. I am a Licensed Realtor®, and only specialize in Foreclosures and Short Sales. The call is free, don’t wait any longer! We’ll need all the time we can to help complete this process!

Other Must Reads

• How Much Does the Bank Get from the Foreclosure Sale?
• One person can make a difference in so many peoples lives!
• More Common Questions on Foreclosures in Arizona
• Filing Bankruptcy Won’t Save Your Home From Foreclosure in Arizona! (Part 2)

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