Windermere Short Sale Service

​Helping You When You Need It Most


Windermere has implemented excellent tools to assist in our role as your representative by offering you an attorney-backed Short Sale Processing Service, Distressed Property Consultants (DPC).

DPC is a services brokerage, specializing in outsourced opportunities for law firms and real estate brokers. In the greater Clark County market, DPC specifically works with Windermere, the law office of Angela Fonnesbeck, the law office of Elizabeth Zagajeski and the law office of Walsh & Friedman to provide unparalleled services to distressed homeowners and real estate professionals in a short sale situation.

  • Windermere and DPC have created an opportunity for you to receive legal counsel regarding your short sale at no out-of-pocket expense to you.  The law office is available to address your legal questions and concerns and will negotiate their fee directly with your lender.
  • Unlike most real estate companies that have only the Realtor® dealing with the bank on your behalf, you have three different professionals on your team:  Windermere, DPC, and the law office.
  • DPC never changes a HUD once it has been prepared by the title company.  In many situations, unbeknownst to the seller, processing companies change the HUD that has been prepared by a title company by adding additional fees, thus increasing your potential financial exposure and delaying the approval process.
  • If you desire an update on the status of your short sale, our business is built around an electronic management system that your agent can access 24/7.
  • Windermere, DPC, and the law office get short sale offers approved.   Our average time to receive a bank approval is less than 60 days.
  • Windermere, DPC, and the law office get short sales closed.  In 2011, we closed 87% our of  short sale offers not only in Nevada, but also in Kentucky, Indiana, Tennessee,Texas and Utah.
  • Your buyer is never left in the dark.  Our electronic management system allows your Windermere agent to keep your buyer and their agent in the know every step of the way.
  • Windermere can help you with all of your real estate needs no matter where your property is located nationally or internationally.

We look forward to the opportunity to assist you in the upcoming months.

 



About Short Sales:

What is a Short Sale?


A short sale is a transaction between a lender, a homeowner and a third-party buyer. In this transaction, the lender agrees to take less money for the home than is owed on the home in order to avoid having to repossess the home through foreclosure. The transaction benefits the homeowner because they are able to exit the home – and their mortgage – without the stain of foreclosure on their credit. In fact, some short sales “fall off” a homeowner’s credit report in three years or less. The transaction benefits the lender because they do not have to deal with foreclosing on, repairing, marketing and ultimately selling the home. Lenders do not want property; they want money. So if a real estate investor or other buyer can show a lender that the process of getting rid of the home after foreclosure will be more trouble than agreeing to a short sale, then the lender will likely agree to the short sale. Finally, short sales benefit the third-party buyer because they represent an opportunity to buy a property for an excellent price.

Alternatives to Foreclosure

You may be facing foreclosure, so what are your options? Try to look at the situation more from a financial standpoint rather than an emotional standpoint. This way you can successfully analyze which option might best suit your needs and desires to move you toward resolving your financial difficulty. One very important thing to remember: Time is of the essence! It’s time to think through your situation and make a decision. Then take action right away so you have enough time to complete the solution you choose.

Nine options when facing foreclosure

1. Do Nothing– If a homeowner does nothing, they most likely will lose their home at foreclosure auction. Credit reports disclose this damaging information. Loan applications generally ask if the applicant has even been foreclosed upon.

2. Payoff/Refinance– Completely paying off the entire loan amount plus any default amount and fees. Usually this is accomplished through a refinance of the debt. New debt is normally at a higher interest rate and there may be a prepayment penalty. With this option, there should be equity in the home.

3. Reinstatement– Paying the entire default amount plus interest, attorney fees, late fees, taxes, missed payments and fees.

4. Loan Modification– Utilizing the existing mortgage company to refinance the debt or extend or modify the terms of the loan. To qualify, you must prove to the lender you have fixed the problem that caused the late payment.

5. Forbearance/Mediation– The lender may be able to arrange a repayment plan based on the homeowner’s financial situation. The lender may even be able to provide a temporary payment reduction or suspension of payments. Information will be required from the lender to show that you are able to meet the new payment plan requirements.

6. Partial Claim– A loan from the lender for a second loan to include back payments, costs and fees.

7. Deed in Lieu of Foreclosure– Give the property back to the bank instead of the bank foreclosing.  Banks generally require the home be well-maintained, all mortgage payments and taxes must be current. Banks must approve this option. Most loan applications ask if this has ever happened.

8. Bankruptcy– This option can liquidate debt and/or allow more time. Speak with a qualified bankruptcy attorney.

  • Chapter 7:    (Liquidation) To completely settle personal debt.
  • Chapter 13:  (Wage Earner Plan) Payments are made toward a plan to pay off debts in three years.
  • Chapter 11:  (Business Re-Organization) A business debt solution.

9. Sale– If the property has equity (money left over after all the loans and monetary encumbrances are paid), the homeowner may sell the home without lender approval through a conventional home sale.

10. Short Sale– Also known as a pre-foreclosure sale, a short sale can be negotiated with your lender if what is owed is more than the property’s value. The lender can agree to accept less than what is owed on the property as pay-off of the loan obligation.
 

Short Sale Explanation


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 because of 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. 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.

A short sale typically is executed to prevent a home foreclosure, but the decision to proceed with a short sale is predicated on the most economic way for the bank to recover the amount owed on the property. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing, as there are carrying costs that are associated with a foreclosure. A bank will typically determine the amount of equity (or lack thereof) by determining the probable selling price from a Broker Price Opinion BPO (also known as a Broker Opinion of Value (BOV) or through a valuation of an appraisal. For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure. In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.

Short sales are common in standard business transactions in recognition that creditors are not doing debtors a favor but, rather, engaging in a business transaction when extending credit. When it makes no business or economic sense to retain an asset, businesses default on their loans (called bonds). It is not uncommon for business bonds to trade on the after-market for a small fraction of their face value in realization of the likelihood of these future defaults.
 

What should Homeowners with challenges meeting mortgage payments do?


Homeowners having difficulty making their mortgage payments should talk to their mortgage servicer or a housing counselor as early as possible.The servicer may not be the same company that originated the homeowners mortgage. The servicer will work with their customers to find viable alternatives to foreclosure where possible. A servicer may own the loans they service and/or service the loans for investors so the ultimate decision as to what alternatives can be provided may not be up to the servicer.

Homeowner options include:


  • Refinancing
  • Repayment plans
  • Loan modifications
  • Short sales
  • Other options


     

Why are there short sales?


Homeowners have an involuntary hardship and can no longer afford their monthly mortgage payments. The property is worth less than what is owed.

Short sale homeowner benefits:

  • Avoid stress of foreclosure sale; honorable exit to a difficult situation.
  • Homeowners can typically live in the home until the new owner closes, giving time to make other living arrangements.
  • Foreclosure is postponed and collection calls will stop once a written, signed offer is received and approved.


     

Short Sale impacts

Homeowner impacts:


  • Credit report will state "paid off in full for less than full balance." Reestablishment of credit may be required to qualify for a new mortgage following a short sale.
  • There may be tax implications.  The homeowner should speak with their tax advisers about the tax implications of a short sale.

What else homeowners should be aware of:


  • Buyers cannot be anyone the homeowner has a close personal or business relationship with, including family and friends.
  • Homeowners are responsible for making their mortgage payments while the home is on the market.
  • Mortgages in bankruptcy require special consideration.
  • Homeowners should speak with their mortgage company to discuss their options. 
     

What does the Seller's  REALTOR need to know:


  • Who would not be eligible buyers
  • Anyone with a close personal or business relationship to the homeowners; family, friends, neighbors.
  • How to possibly reduce the time line
  • Notify the lender that is servicing the property as soon as the listing contract is signed.  This allows the servicing company to complete the property valuation and borrower financial evaluation prior to receiving the offer. This significantly reduces the short sale decision time on a submitted offer.
  • Allow the appraiser timely access to the property
  • Due to the complex nature of the sale, the process does not follow those of a typical real estate transaction

What REALTORS need to know:


  • A short sale approval is good for only 30 days
  • If the closing does not occur within 30 days, the entire short sale package may need to be resubmitted with updated information and/or the approval process may need to start over.
  • Buyer concessions must be approved by the investor.

Common Short Sale Obstacles:


  • Unrealistic expectations
  • Timelines do not follow typical offer-to-close time line
  • Price 'low ball' offers due to market conditions
  • Excessive seller concessions and costs
  • Offer does not meet investor guidelines
  • Mortgage insurer requiring promissory note
  • Processing delays
  • Valuation delays
  • REALTOR- and customer-required documents missing or not signed and dated properly
  • Team not fully engaged
  • Buyer's REALTOR working short sale without homeowner engaged
  • Buyer REALTOR often considered an unauthorized third

What can derail lender approval:


  • Homeowners/sellers
  • Refuse to sign investor-required promissory note
  • Don't provide access to the property
  • Junior lien holders
  • Will not approve transaction
  • Buyers
  • Unable to secure financing
  • Property
  • Unclear title
  • Listing price
  • Too high or too low - either not generating enough offers or creating offers which are too low.

     


Short Sale FAQ

1. What is a Short Sale?

A short sale is the process by which homeowners can sell their home and the sales proceeds do not fully pay off the existing loans(s) and the lender(s) accepts a discounted payoff to satisfy the loan.

This is accomplished by providing proper documentation to the lender(s) to convince them to reduce the payoff balance to allow the sale. If the sale is approved, the home can be sold for a price lower than the total debt on the property without the seller having to come up with immediate cash to cover the shortfall. The mortgage is either fully or partially satisfied and any foreclosure process stops.

2. Why would a mortgage company agree to accept a Short Sale?

There are actually several reasons why a mortgage company would approve a Short Sale, including the following:

  1. Legal Concerns: Mortgage lenders have come under legal pressure to work with borrowers to equitably resolve situations where borrowers are unable to meet their mortgage obligation, particularly when the borrower makes an effort to arrive at a compromise solution.
  2. Wall Street is Watching: Mortgage lenders rely heavily on their ability to package and sell bundles of loans on the secondary mortgage market. They need to sell these bundles of loans in order to put the funds back to work by loaning the money again and collect loan fees along the way. If mortgages perform poorly after they are sold it could impact the lender’s ability to sell their loans on the secondary market. A successful Short Sale gets the loan payoff resolved quickly.
  3. Asset Management Expenses: If a lender acquires a property through foreclosure, the property will be managed until it is repaired and resold. It is expensive to manage real property assets. Keeping properties maintained, keeping utilities on, making repairs and the administrative costs attached to these activities are all costs the lender would prefer to avoid. A successful Short Sale eliminates most of these costs.
  4. Reserve Requirements: Delinquent and non-performing loans place another burden on mortgage lenders. For all delinquent and non-performing loans lenders must set aside funds in reserve to deal with potential losses. These funds cannot be put to work generating new loan fees until the bad loans are resolved. A successful Short Sale lets the lender put more money to work.

3. Can I simply deed my property to someone else and avoid the hassle?

The lender still considers you primarily responsible for payment on the loan. If loan payments do not get paid, or if the lender ultimately forecloses, this will still show on YOUR credit. Do not deed your property to someone else without consulting with an attorney.

4. What sort of hardship would my lender consider legitimate?

Generally, so long as the hardship is real and the mortgage company believes the loan is likely to become delinquent as a result, the Short Sale request will be processed by the Loss Mitigation Department. The key to getting the Loss Mitigation Department to accept a hardship is to submit a strong hardship letter.  Below is a list of “hardships” that are common and frequently accepted by mortgage lenders.

  • Family illness or injury
  • Job loss or significant income loss
  • Divorce or split of domestic partners
  • Death of Spouse
  • Adjustment in mortgage payment or unforeseen increase in living expenses.

5. I am concerned about my credit. How will a Short Sale affect my credit?

The big key here is to avoid foreclosure. Short Sales will affect your credit rating especially if you miss your mortgage payments during the process. But, by nearly any measure, a foreclosure is the most damaging event your credit status can encounter.

6. Can I be considered for a Short Sale if my loan payments are current?

Yes, however the required financial documentation must be submitted along with a detailed hardship letter explaining the inability to continue to maintain your loan payments and reason behind the Short Sale request.

7. Why Work with a Windermere Realtor?

Getting a Short Sale approved by the lender is a complicated, multi-step process. This requires a high level of patience, persistence and most importantly, experience. The Lender realizes that it is in their best interest as well as the borrower's to have the Short Sale file packaged correctly from the very beginning by a Real Estate professional that does not have a conflict of interest.

You get professional representation at LITTLE OR NO COST TO YOU! The lender pays the Real Estate commission.

8. How does the Mortgage Forgiveness Debt Relief Act of 2007 work?

Prior to passage of this law, for any debt that was forgiven in a Short Sale or Foreclosure the homeowner would receive a 1099 and would have to report this forgiven (or cancelled) debt as income. This still holds true for those individuals who do not qualify for the exceptions of the act. From January 1, 2007 to December 31, 2012, the act eliminates the phantom tax on debt cancellation in mortgage discharge.

  • Debt must have been debt incurred to acquire a principal residence
  • Cancelled debt up to $2 million is eligible
  • Sets forth rules for determining the allowable amount of exclusion for taxpayers with non-qualifying indebtedness and taxpayers who are insolvent
  • Debt from a second (non-acquisition) mortgage or HELOC is not eligible
  • Cancelled debt from investment properties and second homes is not eligible

9. What about Tax Consequences?

If you do not qualify for the above exclusions, the IRS defines the amount you are “short” as having been “cancelled.” The lender that allows this debt cancellation is required to issue you a 1099 for this amount and you are required to claim this amount as income.

If a property is foreclosed on, this is also debt cancellation and the default amount can also be treated the same way. In most cases, the amount of default with a foreclosure will be much greater than with a short sale. This is one of many reasons why avoiding foreclosure is most likely the better option.

10. Will the lender pursue a deficiency judgment against me?

In some cases, lenders also pursue a deficiency judgment against borrowers and attempt to collect the amount that was short. This does require a separate action to be filed in court causing the mortgage company to incur further expense. The mortgage company is acutely aware of your inability to pay and often sees further collection as fruitless. In most cases, a short sale will get the lender more money than a foreclosure. The bank also has the right to pursue a deficiency judgment in a foreclosure. When considering all consequences, a short sale is almost always a better option than a foreclosure.

 

The information provided is for informational purposes only. Prior to entering into any Short Sale, you should discuss the matter with a qualified accountant or attorney regarding your options and the consequences of each.