What is a short sale?

A short sale is when the owner is attempting to sell the home for an amount lower than what they owe on their mortgage. Until the lien-holding bank approves the sale of the property as a certain price, short sales listing prices are essentially made up. Owners and their agents tend to use low prices to fish for offers, in order to use the offer as leverage on the bank. In a short sale, the bank has to approve the sales price and agree to take a loss on the sale.

A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.

In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank's loss mitigation or workout department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower's financial situation.

...and this negotiations could be long and a lot of times the transaction does not go trough. However statistically only 50% of the short sale transaction are going to the closing table, so you should be very patient and keep in your mind that you could have your commission sometimes within a year or even will not close at all.........

It is possible the deal may fall thru. It is crucial the property is priced right from the beginning. If you list too low ofcourse the bank wont accept or they may counter and then you have to start basically all over again. If you list too high then you wont get any offers. If you list at the right price then maybe you can generate multp offers so if for some reason the deal falls through due to the buyers and the bank has given approval then you can relist as an "approved short sale" or just start calling on the backup offers that came in and get it closed in just a few weeks.

SHORT SALE EXPERTS.....HAVE YOU EVER SEEN THIS...

I HAVE ALOT OF SHORT SALE EXPERIENCE AND THIS IS A FIRST....
COUNTRYWIDE I & II.. THIS TRANSACTIONS BEGAN IN NOVEMBER. WE ARE AT THE POINT OF GETTING THE APPROVAL FINALLY.

The negotiator reported 3 weeks ago, we have approval on the loan, however we need to submit to the MI (Mtg. Insurance) Company for approval. I thik....well, ok, never heard of that, but I have had contact with MI company's on short sales.

3 days ago I am told we have the approval: The MI company wants $8K Payoff and $8K Note from my borrower. I respond with my borrower only makes $2200 a month, and is the sole support of a family of 4 and can not pay this. My borrower is ready to walk anyway and has only been in this home because it saves him money to not make the note right now.

The buyer on the home says he will raise the sales price up to the max value ($9K more), pay his own closing costs, and with the money CW had on their approval $3K, we are right at the $16K that the MI Company wants. I have a revised HUD sent this morning to the Negotiator who responds within 1 hour with, "The MI company has the final word, and their approval demand stands"

I call her, and she says we are dead in the water???? huh???? I don't see why a MI company would rather foreclose than take the $16K they asked for. They want to see it come from my seller I am told.

Anyone ever heard of this?
Anyway today

The MI companies can definitely be a hassle to deal with on a short sale. The problem is that the MI is going to be paying a portion of the lender's loss that they claim. So no matter what, the MI company loses. In most cases the MI wants some of that loss back from the homeowner, however the lenders push a little too much with this point. I spoke directly to the MI company of one of my current approved escrows and they said as long as the seller knows that we reserve the right to pursue him later, then we will exclude from him having to pay a prom note or cash contribution now. I am not sure why the lender did not tell us this as being an option. Either way, after speaking with the MI company personally, I was able to get the approval with no prom note or contribution by the seller.

It is probably not the MI company that cares where the money is coming from. It is most likely the lender that does not want to give money back to the MI company that they can possibly gain from the buyer or any other party to the transaction. The lender already knows they will get paid the loss claim from the MI company anyway and sometimes that is better than negotiating the short sale.

They are bluffing. Tell them ok the homeowner can file BK and keep your bad loan on the books for the next few years or we can get this one done. What do you want to do? (usually this is said to the supervisor)

You can also go to the MI company directly if the lender will tell you who it is. If the MI company finds out the lender is not working out to get it closed and the insurance loss claim could be bigger in foreclosure they might deny the lenders payoff claim.

Many MI companies have been doing this and saying servicing guidelines and workouts were not fully followed in loan default and the bank took the easy path and filed a loss claim. You think lenders are cheap wait until you see a insurance company!

The MI company wants to make sure the pay as least as possible as many have already gone under because of the unanticipated surge in defaults.


"I spoke directly to the MI company of one of my current approved escrows and they said as long as the seller knows that we reserve the right to pursue him later, then we will exclude from him having to pay a prom note or cash contribution now. I am not sure why the lender did not tell us this as being an option."

Because they want to say that as a last resort. Pursuing litigation and collection is costly and has a high failure rate. Generally their credit is crappy so they don't care about that and if you go as far as to sue and do a wage garnishment or bank debit the former homeowner will file a chapter 7 and blow it out anyways.

Why do collection attorneys says we will settle a 3,000 account for 2,500 when they will really settle for 600.00? Because they want to see if they can get 2,500 first.

Out of so many files they get some to pay cash and hold a promissory note and actually pay it back but if they never asked that revenue would be lost.

I realize the logic in this, however in my situation above, we went back and forth several times already and it was already at that last resort stage. The lender was not going to change anything until I finally spoke with the MI company directly.

The other thing to look at is the financial statement. Does the MI think that your seller is going to have money at the end of the day? Did you show a huge negative on the financial statement or did you show that he had money at the end?

Make sure on the financials that every possible expense has been thought of... including rent on the new place they will be living in.... I once had a MI company going after a $50,000 promisary note because he felt that once the mortgage was gone the seller wouldnt be paying that or any utilities or upkeep and therefore have all this extra money at the end of the day... I told the MI well they are still going to have to live somewhere and pay somewhere... he said to me "oh - I just thought they would move in with family somewhere and not have these expenses anymore".... so now I always make sure that I include all the future living expenses...

I live in Georgia but I think this is valid throughout the country. My closing attorney said that there was a newer law placed on the books that basically says if lender gives a loan to someone that can not viably pay back then it was an invalid loan... I will try to find the email he sent and post it for your FYI.

I hope this helps you. Good Luck!