The New Face of Short Sales: Part 3

This is the last installment of Phil Tesoriero’s trilogy, “The New Face of Short Sales.” Be sure to check out Parts 1 & 2 as well:

Part 1: Basic Short Sale Information
Part 2: Homeowner’s Preparation before a Short Sale
Part 3: After Receiving Your Short Sale Agreement

The New Face of Short Sales: Part 3

By Phil Tesoriero

You should review the short sale agreement, which the servicer will provide to you. It describes and discloses the roles of all parties involved in the transaction. You do have the alternative of going to contract and applying for an “alternative short sale approval”[3.1]. The standard agreement lists the following:

Property must be listed with a licensed real estate professional familiar with and doing business in the area.
Listing period of no less than 120 days and up to 12 months.
You must give authorization for the servicer to communicate with other parties (mainly the above mentioned real estate agent)
The listing must contain language that the transaction is subject to approval by the servicer or other 3^rd parties.
The servicer will pre-approve a list price, in the case of the contract being submitted they will approve the proceeds.
The listing must state the amount of the sales commission, NOT TO EXCEED 6%.
Must be an arms-length transaction[3.2] such language is needed in the contract.
The buyer must agree not to sell within 90 days of the closing.
You will be released from all future debt of the lien.
You will receive up to $1500 for relocation.
You must consult your tax professional, as there are tax considerations involved with this transaction. You will receive a 1099C.

As long as you comply with these guidelines, the servicer will agree NOT to complete a foreclosure sale. That being said, it is important to understand that there are times the servicer can revoke the short sale agreement:

If there is any evidence of fraud
If a bankruptcy is filed
If there is a significant decline in the condition of the property
In the event your financial condition improves.

Under the terms of the agreement you may be required to pay 31% of your current income as a modified mortgage payment towards your mortgage during the agreement period. Your listing agent must also work in good faith and do everything they can to market, sell and close the transaction to be in compliance with the servicer’s agreement.

Once a buyer is procured and you have in hand a fully executed contract, these contracts must be submitted within three days to the servicer. This documentation along with proof of funds for the buyer and the title information previously discussed. Here is the GREAT NEWS: Within 10 days, the servicer is required to reply with a decision to approve or decline. The notice will be mailed to the property so it is important you look for it and discuss it with your listing agent as soon as it is received. If the offer is approved by the servicer they will set a closing date no less than 45 days from the contract date, unless otherwise agreed by the buyer.

The best way for you to proceed with getting your distressed situation resolved is to work together with your listing agent. It is sometimes hard to stay motivated in this type of transaction, but working together and submitting a superior proposal to the servicing company you should see positive results and a quicker resolution to the situation.

[3.1] If contracts are executed prior to submitting a Short sale agreement, will need to submit an alternative request form, as per the Treasury guidelines.

[3.2] Parties of the sale must be unrelated. Both parties will be required to sign affidavit stating they are unrelated.

For more information on building a superior short sale proposal that is Treasury Department Guideline Compliant visit: www.TheBigForeclosureSecret.com

——————————————————————————————————————————————————————-

Phil Tesoriero Phil has been actively teaching on defaulted real estate for the past 3 1/2 years. He has written and teaches the only class in the country approved by NAR to satisfy the prerequisites for receiving SFR certification. He is also one of only a few speakers NAR acknowledges to speak on the topics of Short Sales and REOs. As a former New York City firefighter, Phil knows what it is like to help a family in need. He extends the same helping hand when rescuing families from foreclosure.