What is a short sale and how do I qualify for one?
A short sale is a name given to describe the process of a home selling for less money than is owed to the bank. The term short sale refers to the amount of money owed to the bank will be ‘short’ at the conclusion of the sale. Banks often will approve a short sale in writing including any concessions that they are asking for. The offer to purchase should have a “subject to…” condition in the offer giving the seller the opportunity to accept or reject the bank’s approval. The owner should always have the last say!
In order to qualify for a short sale, a homeowner must demonstrate to the bank the existence of a hardship leading up to their inability to continue making mortgage payments. Hardships change depending on the individual and are unique to you. You or your spouse may have taken a pay cut. You or your spouse could have lost your job or worse, you both could have lost your jobs. There could be health issues or mounting medical bills. Your family could be growing or do to the loss of a family member, you are not able to pay your bills. There could be a marriage or a divorce. It could be due to escalating taxes or unexpected expenses- whatever your specific circumstance is, it needs to be expressed and explained to the bank in order to be considered for a short sale.
Assuming we get passed the hardship criteria, the bank will then review your assets and liabilities. It is possible that you suffer from a hardship either temporary or long term and at the same time be sitting on a boat load of money in a savings account waiting for you to retire or your next investment opportunity. Banks want to make sure that you don’t have the money to satisfy the mortgage or at least share in the loss with them even though you may be going through a cash flow hardship. They will ask for copies of bank statements and tax returns to satisfy their curiosity.
If the bank is satisfied that you’re not a closet millionaire, then they will confirm your hardship with a review of your income and expenses. The bank will ask for an explanation of your current expenses and your current income. You will be asked to fill out an income and expense worksheet where you identify your total expenses and total income. In many cases, my clients actually calculate higher monthly expenses just for their monthly essentials than the money they take home. As such, the savings account gets drained to zero and bills become delinquent.
Once the bank reviews and confirms the hardship after reviewing your income and expense worksheet, they will look over your assets to make sure you don’t have money in an account somewhere else. If they determine that there is a hardship and you don’t have the financial assets to make up the deficiency, you have a very good chance of getting approved for your short sale.
If you'd like more information about short sales, visit my website at: http://thomasbraunagel.yourkwagent.com/atj/user/AdditionalGetAction.do?pageId=350665 . From there, you’ll have access to a short sale questionnaire, short sale blogs, video blogs and a full line of questions and answers I’ve recorded over time. Please feel free to call me and to discuss in person or on the phone how I can help at 203-257 1352.
If you’re a buyer or investor and would like a list of short sales available in the Trumbull, CT. area, visit http://sellit.ctehomes.com/listings/areas/51431/propertytype/SINGLE,CONDO,MULTI,LAND,FARM,MOBILE,INCOME,COM/listingtype/Short%20Sale/.
Lastly, If you’d like to be included on a weekly list of short sale properties in the Fairfield county area, send me a reply and I’d be happy to add you to the growing list.
Tom Braunagel, Keller Williams Realty, Trumbull, CT.