The Sunburst Outlook on Facing Reality
How long does it take an underwater homeowner to face their reality?
- ENDURING THE EMOTIONAL HARDSHIP: The average person needs approximately 6 months of consecutively paying their monthly mortgage with the full understanding of their property devaluation.
- This is when you are reminding yourself how much you love your home and your neighborhood. You understand what is occurring around you and try to maintain positive thinking. The thought of having to move from your home is unheard of and you do not likely want to show signs to your neighbors and/or friends - Even if they may be in a similar situation.
- REALIZATION OF THE FINANCIAL HARDSHIP: Once this is realized, it usually takes this same person about 6 minutes to overcome the emotional end and focus specifically on the financial outlook. It's about survival and returning to a more normal / stable situation.
- This is when you realize that it's time to stop being a victim and start being a survivor. Unfortunately, the real estate marketplace has become somewhat comparable to a cancer. Treatment options range from making drastic decisions to doing nothing and suffering the consequences. As in life, early detection is imperative - when odds are more favorable.
What Happens Next?
If you are veering in the direction of having to do something soon and/or facing the possibility of losing your home to Foreclosure, you should carefully consider a Short Sale. In order to do this, it needs to become less of an emotional decision and more of a business decision.
As in any prudent business decision, it is highly recommended that you secure professional guidance / representation. What criteria should be taken into consideration when making this decision?
- Work with an individual or group that is directly negotiating on your behalf, in your best interest, and not a 3rd party service facilitator.
- Make sure that you are working with someone (or entity) that is in good standing with either the California Department of Real Estate (for Real Estate Brokers) and/or The California State Bar Association (for Attorneys).
- Make sure that you are not paying for anything UP FRONT.
- Make sure you are working with someone that you feel is competent, knowledgeable, understanding, trust worthy and experienced in short sales / loan modifications. This may not be the agent who sold your home to you and said that they wanted to be your Realtor for life.
What's The Goal When Short Selling?
- Evaluate the subject property; determine listing price; execute listing agreement / and list home for sale on the MLS (Multiple Listing Service);
- Secure buying party and execution of purchase agreement;
- Assemble the Short Sale Package and submit to the bank or lender. The Short Sale Package will be clearly defined below under "Typical Documentation Required for a Short Sale Package."
- Initiate dialogue with bank / lender authorized party(s) through the bank’s loss mitigation or workout department; negotiate accordingly;
- Determine move out date. This is typically discussed at the time we take the Listing. Every effort will be made to effectuate a manageable transition.
- Open escrow / close transaction.
Major Negotiating Point: When the bank agrees to extinguish the remaining balance and it is clearly indicated on the acceptance of the offer. Without that stipulation from the bank, they would still be able to go after the sellers for the amount owed (deficiency balance).
Is The Short Sell Process An Easy One?
As mentioned numerous times on this website, the process in a Short Sale is considerably different from a standard real estate transaction between buyer and seller. It can and/or will often be a frustrating experience for everyone involved. On a more positive note, the banks and lenders have been improving at their end more recently; making headway towards streamline transactions.
Typical Documentation Required For a Short Sale Package
1. Letter of Authorization
The bank or lender will require a letter from the Seller to permit the listing agent/broker to speak on their behalf and represent them in negotiations. It is also advisable to provide the Listing Agreement between Broker/Agent and Seller.
2. Hardship Letter
The Seller is required to explain (in writing) why they are requesting a Short Sale. Reasonable hardship needs to be established to show that your ability to continue paying the monthly mortgage payment(s) has been impacted.
3. Purchase Agreement
The bank or lender requires an executed contract between Buyer and Seller contingent upon acceptance of the Short Sale. Similar to more standard Seller transactions, the bank and lender will require documentation to support the Buyer is qualified with acceptable credit scoring (FICO), Lenders Approval, and Proof of Funds (Verification of Deposit) for down payment.
4. Estimated Settlement Statement (HUD-1)
The bank or lender requires a line item detail of all expenses incurred prior to and/or after the sale. The Escrow Company utilized in the transaction will provide this information.
5. Sellers Financial Information
Similar to when you originally qualified for your loan to purchase this home, the bank or lender will require submission of bank statements, investments, paycheck stubs, etc. It will be determined form their examination if you're circumstances are compelling enough to warrant a Short Sale.
Giving Birth to a Short Sale
The submitted Short Sale Package must be prepared to perfection. Any lapse in documentation or interpretation may result in delays that can prevent the success of a short sale. When the complete Short Sale Package has been delivered to the bank, a negotiator will be assigned. Assigning a negotiator may take some time, but when one is assigned we can begin discussing the details of your short sale with the bank. After this process occurs, hopefully a Short Sale approval will be issued and escrow can proceed. The Short Sale approval will specify a closing date which will become a stipulation of the purchase agreement. At this point, the buyer then secures financing and the transaction moves forward to the close of escrow.
Don’t believe anyone that claims they have resources and contacts with decision makers at banks to get your Short Sale completed. The simple truth is that the banks and lenders are inundated with tens of thousands of requests each day. They are overwhelmed and understaffed. This in itself is one of the major risks in pursuing Loan Modification. Success occurs through organization, persistence, and the balanced knowledge of being both lender and real estate entity.
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unburst Realty is the dba of Sunburst Mortgage Corp; a licensed corporation with the California Department of Real Estate. License Number 00990963. Sunburst has been licensed with the State of California since 1988. To access real time licensing information online with the DRE Click Here.
