Mark Denny

RE/MAX WINNING EDGE
501 Washington St

Durham, NC 27701
Phone: (919) 949-0243

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What is a Short Sale?

A ‘short sale’ is when a bank accepts a discount on a mortgage to avoid a possible foreclosure or bankruptcy. For example: A homeowner, who is facing foreclosure, has an existing first mortgage of $300,000. An offer to the lender for $250,000 is acceptable as full payment for the loan. This is a ‘short sale’. Why are they willing to take such a loss? Several reasons; first of all, banks do not like excess inventory and delinquent loans on their books. An opportunity to sell the property is very attractive. Secondly, lenders know they could lose a substantial amount more if the property goes to foreclosure / trust deed sale.

There are many fees involved: i.e., property taxes, liens, repairs, etc. They’re better off taking the minimal loss beforehand and be finished with the headache and liability if in fact it goes to a ‘trust deed sale’. They are opting for the lesser of two evils. Basically, the same thing you are doing.

What does a Short Sale cost?

A short sale should not cost you a dime! Short sale brokers and agents that specialize in this industry are compensated by your lender as part of the negotiation process and should have to charge you anything. NEVER, should you ever pay an upfront fee or allow someone to modify the deed on your property when conducting a short sale. As experts in this field, we highly discourage these practices and they are typically scams.

What if my home already has an auction / sale date?

In most cases, if there is an auction / sale date we can convince the bank to postpone for at least 30 days and some cases 60 days. Where you will run into difficulties, is when the date is just days away. It is imperative, when considering a short sale, that you try to start the process as soon as possible.

Why do a Short Sale?

Typically when someone is at the point of not being able to afford their home due to; high rates, dips in property values, divorce, loss of employment, decrease of income, etc., then we are forced to make a life altering decision. We will be the first to tell that a short sale is bad, but a foreclosure is worse. Most importantly, you have the ability to save your credit from reflecting a ‘foreclosure’ as to simply having a ‘settled debt’. Any lender will tell you, having a foreclosure in most cases will prevent you from purchasing or refinancing real estate over the next seven years.

What is required?

All banks will ask for several standard pieces of information:
• A letter of hardship
• Two years tax returns (if you have not filed, include in hardship letter)
• Two most recent paycheck stubs for each person on loan
• Two most recent bank statements
• Copy of mortgage statement(s)
• A signed borrowers authorization
* We require all items to be copies and sent in all at once

Negotiating a short sale with the lender is a very difficult and delicate process, generally because it is a daunting task finding a bank officer who has the authority to accept a discount. You will have to call around to locate the lender’s “Loss Mitigation Department.” More than likely, each lender you deal with will have a separate name for this department. Much like getting your phone bill corrected, you can expect the process to involve a lot of waiting on hold and being bounced around an intricate maze of automated voice mail systems. Once you get in touch with the right person, then the negotiating begins. That’s where we comes in!

From the lender’s perspective, a short sale saves many of the costs associated with the foreclosure process; attorney fees, the eviction process, delays from bankruptcy, damage to the property, loss of a ‘working asset’…which is extraordinary, costs associated with resale, minimal headaches, employee expenses, etc. Banks are in the business to lend money for real estate…not manage it! In a short sale scenario, the lender gets the property back faster, so it is able to cut its losses. Our job as the negotiator is to convince the lender that it will benefit them tremendously by accepting a short sale now as to a foreclosure later.

The lender will want some information about the property and then you. Specifically, the lender wants to know what the property is worth. The lender will generally hire a local real estate broker or appraiser to evaluate the property (called a broker’s price opinion or ‘BPO’). We will also submit our own comparable sales information. In addition, we will offer as much specific negative information about the property as possible. Also, we will include some relevant information about the neighborhood and the local economy if things are bad (copies of newspaper articles with ‘bad news’ will help). A contractors bid for repair estimates should also be submitted, which, of course, should be the highest bid you can obtain! Keep in mind, the bank is not necessarily local to the subject property. They need to be educated with your market.

The lender will also demand financial information about you and anyone else that is on the loan(s), not title. Sort of a backwards loan application, we must demonstrate that you are truly in a hardship and an ideal candidate for a short sale. It is our duty to make sure the bank understands that you simply can no longer afford the payments and the property. This process is very time intensive; however, this is what we do, and we do it well! Typically, it requires much more paperwork, attention and expertise than the loan required to put you in this mess. We insist that all of our clients submit a ‘letter of hardship’ describing to the bank all of the unfortunate circumstances that have taken place recently and has caused you to no longer afford the property. This letter is most effective when written no more than two pages. Don’t stretch the truth…it’s not necessary, they understand.

Finally, the lender wants to see a written contract between you and the broker (real estate agent). We need to demonstrate to the lender(s) that all parties involved are doing everything possible to sell the property for as much as possible. The property needs to be marketed extensively and listed correctly. Do understand, the bank is taking a substantial loss, so don’t expect any funds at the close of escrow. As a matter of fact, you cannot receive anything, and all losses the bank incurs, should be kept to a minimum. Remember, the lender is on our side and wants to help throughout the process. Yes, some are easier than others. However, we all need to come together to satisfy all parties involved.

It is unlikely that the short sale bid is rejected, providing the offer is within reason. Lenders aren’t emotionally attached to your property, what they are attached to is the ‘bottom line’. They want a foreclosure as much as you do. Short sales are bad…a foreclosures is worse…much worse!

Why Mark Denny?

Simple! Mark has the experience, professionalism, knowledge, and contacts (with the lenders) to negotiate much more effectively than most in the business…which is few and far between. In addition, he will help to have your credit repaired over the next twelve months in order to get you back on track and get your credit score up to an respectable level. If and when that day comes when you decide to purchase or refinance real estate, he wants you to be able to qualify and get the best possible deal with the best possible rate. It’s my job to help put the nightmare behind, sleep well at night and resolve you of this obligation. He understands how stressful this time can be. For help fill out the form below, and Mark will contact you. Hurry because time is not on your side!

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Mark Denny

RE/MAX WINNING EDGE

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