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The following questions will help you understand what a short sale is and what the process of doing a short sale involves. The answers will also explain how we help you through the process and how you can help.

1. What is a short sale?

A short sale is one in which the proceeds from the sale are less than what is owed on the mortgage at the time of the sale, which results in want is called a “deficiency.” The seller can either bring money to the closing table to make up the difference or ask the bank to forgive the difference, based upon proving a hardship. It is that negotiation with the bank about the deficiency that we help you with.

2. What is a valid short sale hardship?

The lender won’t just let the borrower off the hook for the mortgage deficiency because the property value has declined. That is not a valid hardship, just an inconvenient fact of life these days. Hardships are things like the loss of a job, an illness that force loss of income, a death or divorce or having to move more than 50 miles away for job purposes. You must be able to prove a real hardship in order to be considered for forgiveness of the deficiency by the lender. Talk to the Nationwide people about what they are seeing as acceptable hardships. It is part of their job to help you define and explain your hardship.

3. Why do I need help with the process?

The process involves several steps - the listing of your house and acceptance of an offer, lots and lots of documentation and lots of persistent communications with the lender’s negotiator. Many of the steps in the process require the special skills and experience that members of my team bring to the game. It is certainly possible for you to do all of those things yourself, but you will likely find yourself overwhelmed and frustrated very quickly. If you need to get this done in a timely manner, this is no time for an OJT DIY job.

4. What happens during the short sale process?

First we determine what the current fair market value is for your house and get it listed for sale. While I’m doing that, you can sign up for the help from Nationwide and  begin collecting all of the things that Nationwide will need to submit in your short sale package. I will market the house and negotiate with buyers to get a purchase contract submitted. You sign that offer and let Nationwide submit the offer and the short sale package to the lender. The lender will assign a negotiator and begin the process of reviewing your case for relief on the mortgage. They probably will come back out and ask for more documentation or clarification of something that you’ve submitted. The hoped for outcome is that the lender accepts the purchase offer and issues a letter of acceptance with a clear indication that they will not pursue collection of the deficiency. There are other outcomes that will be discussed further below.

5. How long will the short sale process take?

There are no rules or guidelines for how long it will take. The people at Nationwide say that their average is 90 days. Remember that this means that a few close quicker and some take longer. The horror stories that you have heard about short sales that took 9 -12 months to close are probably true. There is no set time. It is the job of the Nationwide negotiators to keep bugging the lender negotiators for status updates and to keep pushing them along in the process. They will also keep you informed of the status on a weekly basis.

6. Can you guarantee me up front that the bank will not come after me?

NO! There are no guaranteed outcomes going into a short sale, no matter what anyone else tells you. The lender has several options - they could forgive the deficiency on the loan in writing (Which is the outcome you want), or they could ask you to sign a promissory note (a personal, unsecured loan) for the deficiency amount, or they could ask a court for a deficiency judgement, which is a court order to pay the deficiency amount. Lenders often sell those deficiency  judgements to collection agencies, which can then pursue you for the amount due (not an outcome that you want). The lender can pursue deficiency judgements after the sale is complete for up to 6 years, if they have not given that right up in writing, and those judgements can stay in affect for up to 20 years.

The outcome that you want (and the one that the Nationwide people will be striving for) is the written notification that the lender accepts the short sale price and forgives the deficiency (there are several ways that can be worded and the Nationwide lawyers know what to look for on your behalf). I will write the Purchase Agreement contract such that you have the option to cancel the sale if the lender will not agree to an outcome that you can live with; however, remember that you will have few alternatives left, short of foreclosure.

7. I have two mortgages on the house. How will that impact the short sale process?

The process gets tougher with multiple lien obligations against the property. Each lien-holder must agree to release your obligation to them. The process always starts with the first lien-holder (the primary mortgage) and works out from there. The only debts that you can have that must be negotiated or cleared before the primary mortgage holder are tax liens from the Federal or State governments. Local taxes are usually paid off out of the proceeds of the sale. Since the sale is already generating less that the primary lien holder is due there is a protocol in place to offer the second mortgage holder a token amount (usually about $3,000) to forgive the second mortgage (which could be a Home Equity Line of Credit or HELOC). The second mortgage holder is not obligated to accept the offer from the primary mortgage holder, nor is he required to forgive any deficiency (which again is the outcome that you want). That’s part of what the Nationwide negotiators will be trying to get accomplished in the process.

8. Should I stop paying on my mortgage?

I can’t answer that question. That would constitute legal advice which I’m not qualified to give. You may want to ask the Nationwide people about that, but they also may be reluctant to give you an answer. The best advice that I can give you is to seek legal advice from an attorney on that question.

In the past there were some lenders who would not even discuss a loan modification or short sale with a customer who was current on their mortgage. That has changed and most prefer to deal with borrowers who are demonstrating a good-faith effort to pay, even in the face of a hardship. The reality of the current economic environment has sunk in to most lenders.

9. I’ve already received a Notice of Delinquency; do I still have time to do a short sale?

MAYBE. The Nationwide people will tell you that they need at least 60 days to get through the process. Remember that their clock starts AFTER we get an acceptable offer in hand. In Michigan the process to foreclose takes 45-60 days from the time that you get a Notice of Delinquency. The foreclosure starts with the Delinquency Notice and proceeds through the Sheriff's Sale, after which Michigan provides for a  Redemption Period, which allows the homeowner six months to live in the house before being evicted (the Redemption Period is one year for properties over 3 acres). The homeowner can redeem his/her house any time during the Redemption Period by presenting payment in full (plus any penalties that the lender has assessed) or getting the lender to agree to a short sale amount as payment. A short sale can take place anytime before eviction; however, it is always better if you get the process going before you even get the Notice of Delinquency. Click here to read more about the foreclosure laws in Michigan and how they work.

10. What does it cost to get your help? How do you get paid?

There are two parties on the team that will be working for you and neither one will cost you anything. I get paid a commission as a Realtor out of the sale proceeds. The lender agrees to pay my commission as part of the cost of the sale. The Nationwide people also get paid out of the proceeds. They bill the bank for the legal and negotiating services on the HUD statement. In some cases the bank may refuse to pay one or both of those fees. Nationwide spells out in its engagement contract with you that in those cases you will not be billed for their services. If the property doesn’t sell and the lender ends up foreclosing and taking the property, you will not owe either me or Nationwide anything.

11, How do I get started?

Simple. Use the Contact Us page at this site to either email me or call me using the phone number there. Remember that the first step is establishing a current market value for the property. You should prepare yourself to become emotionally detached from the house and to not get upset with what I tell you it’s worth today.

Remember that you’re not going to get any money from the sale anyway and that your goal is to get it sold as quickly as possible. The market just doesn’t care about things like what your neighbor down the street sold his house for last year or how much you need to get to pay off you mortgage. It only cares about what other similar homes are selling for right now. If you live in the Milford, Michigan area, you can get a good idea about that by going to my www.movetomilford.com web site and clicking on the “What has sold in the area” choice. You’ll be able to see everything that has sold this year in the Townships of Milford, Highland, White Lake, Commerce, Lyon, West Bloomfield, Green Oak, Brighton and Hartland.

Once you contact us, I’ll do a market analysis and prepare the listing paperwork while you get busy finding all of the things that the Nationwide people will need for your short sale package. Click here to get the Nationwide short sale package. You can be on the market within a couple of days.

12. How can I help make the process successful? As the seller, you need to focus upon two of 3-P’s of real estate sales - Patience and Persistence. I’ll take care of the third “P” - Price. It will help a lot to get an offer on the place if you also put some attention on the 3-C’s of real estate - Condition, Clutter and Cleanliness. Even an aggressively priced short sale house will not attract the buyers that you want if it is need of repairs, is cluttered and needs a thorough cleaning.

I think I’m about ready to do this, but tell me more about who you are - About Us.

OK, I’m ready to get this process rolling - Contact Us

I want/need to read some more about this short sale thing before I go any further -

Fair enough. Below are some links to more Web sites and articles and blog posts that might help. Several of these links take you to About.com which is a good source for information about just about anything. Most of the About.com articles were written by Elizabeth Weintraub, a well respected California real estate writer and a Realtor herself. Some are written by people trying to sell you their short sale services or help, so take any ads or solicitation at those sites with a grain of salt. It is important that you are informed about all of the alternatives that you have, if you are having difficulties keeping up with your mortgage payments due to some life change Short sales are just one of those options.

The Complete Short Sale Process by Elizabeth Weintraub on About.com

The Real Estate Short Sale Process Step-by-Step by James Kimmons on About.com

The Wikipedia entry on Short Sale (real estate)

How a “Deed in Lieu of Foreclosure” Works in Michigan from the DirectoryM archives

Foreclosure and Short Sale Taxes by Elizabeth Winetraub

Short Sales, Foreclosures and Your Credit Score by Tom Quinn on the Credit.com web site

How Does a Foreclosure or Short Sale Affect Your Credit Score? By Dana Anspach at About.com

Qualifying for Short Sales by Elizabeth Winetraub on About.com

Short Sales and Mortgage Fraud by Elizabeth Winetraub on About.com

People who do Strategic Defaults may be in for a surprise by Broderick Perkins in Realty Times

There are tons of articles, blog post and other sources of material for you to read on the Internet - just Google short sales and you’ll get more than you can ever read.

Here’s the bottom line - both shorts sales and foreclosures suck. They both will impact your credit score. They both are a pain in the behind to go through and they both will result in you needing to find a new place to live.

With a short sale, if you are not delinquent on your mortgage payments, you may qualify for a new mortgage right away; otherwise it’s likely 2-3 years before you can get a mortgage again.

With a foreclosure on your record it is likely 4-5 years before you can qualify for a mortgage again and with a bankruptcy, who knows if most banks will ever give you a mortgage again. The choice is up to you.

The other choice that you have to make is whether to try to do this alone. I can think of no more difficult task than attempting a For Sale By Owner short sale. There isn’t a pole long enough (let alone the proverbial ten-foot one) for any Realtors to touch that scenario, let alone advising a buyer client to work with you. You need professional help to do your short sale.  Whether it’s my team or some other teams of professionals, get help!