How to facilitate a shortsale transaction
loading...
loading...
Part I of this shortsale article series describes the short selling process as an alternative to foreclosure, and details how to qualify a negative-equity homeowner for a short payoff, set the sales price at the broker price opinion (BPO) and submit a purchase agreement to the lender’s loss mitigation officer for appraisal and closing conditions.
The discounted payoff from start to finish
Consider an unemployed homeowner who misses a monthly mortgage payment. The homeowner’s lender contacts him as mandated regarding the delinquency and discusses the homeowner’s financial situation. Unable to make payments and desperate to avoid the personal onus of a foreclosure, he solicits the help of a real estate agent.
Before meeting with the homeowner, the agent downloads a “property profile” (title condition) for the home and a printout of recent sales in the surrounding area from a title company website, the first step in any seller counseling and listing effort. The agent, on review of the reports, comes to a preliminary opinion of the property’s fair market value (FMV) ― a broker price opinion (BPO) ― he will use to set the listing price.
However, he quickly notes the mortgage on the property is an amount that greatly exceeds the property’s value, a negative equity situation. His prospective seller is thus “underwater.”
End of free preview
The rest of this content is only available to first tuesday Members. If you are a current first tuesday Member, please login above.
Not a current Member? For only $29.50, our Annual Membership includes access to:
- the first tuesday journal;
- over 350 first tuesday real estate forms;
- over 35 FARM letters; and
- a 16-book reference library and more!
To sign up, visit firsttuesday.us!
loading...
loading...
About The Author
ft Editorial Staff
is the writing staff comprised of legal editor Fred Crane, In-House Broker Consultant Fernando Nunez and writer-editors Connor P. Wallmark, Giang Hoang-Burdette, Jeffery Marino, Carrie B. Reyes, Sarah Cantino, Matthew Taylor, Matthew Shade and Nicole Jessen.
Excellent article. I might add that if the property owner is an investor, not a homeowner, different rules may apply, and that it is always well to consult a knowledgeable real estate broker and a real estate attorney for the most recent information.
Investors are most at risk in these situations, since they are not afforded all the protections that are given to homeowners.
loading...
Great article. I hear that the president would allow a principal reduction to home owner who are underwater. Can you please give me your input.
loading...
no you will not have to pay it off.but and it is a big but! banks have been trying very hard to egthtin up their exposures to risks, and having a equity line of credit now days is considered a risk.so the holder of second loan (equity line) may not agree for subordination,even though they are the same bank. they may also not allow you to take cash out. unless there is substantial equity exist.your best chance is going to be refinancing with the same lender,and before spending any money,you need to make certain that the line of credit holder is willing to subordinate.
loading...
excellent article…I’m buying a short sale property and thanks to this article, I finally understand what that means and why it is taking so damned long. I bleed for the previous home owner.
loading...
IQUESTION: S IT WRONG TO CALL IT A SHORT SALE WHEN…
Is it illegal and/or unethical for a realtor to offer a property as a “short sale” when in fact it is owned outright by the seller?
It is being sold for about 3 times as much as the seller paid 30 years ago.
However, it’s being offered for about 33% less than the asscessment.
loading...
Good explanation for a multifaceted problem.
loading...
Thank you! Moving from Europe to USA, I had no idea what a short sale was. This article was very informative and helpful without being too long or technical.
loading...