By Tom Branch, on September 20th, 2010 
Once the Short Sale has been approved, the lender will furnish a formal approval letter, and the contract can move forward. Exactly how that contract moves forward varies from State to State as do the contracts themselves.
Based in Dallas, we can only speak to Texas contracts. In Texas, the transaction typically closes within 30 days of Short Sale approval.
However, in Texas, the contract execution date is amended to reflect the Short Sale approval date. That means the buyer usually does not have the property inspected or appraised until after the Short Sale has been approved by the lender. It would be senseless for the buyer to spend money for those services before even knowing if the Short Sale will be approved.
In Texas, the buyer often has an Option Period (usually 7 – 10 days) in which to have the house inspected. Regardless of what the inspection reveals, the buyer can terminate the contract during the Option Period at no cost other than a small Option Fee.
In regards to the inspection, homeowners in a Short Sale situation typically don’t have the money to make repairs. The lender is unlikely to pay for repairs either given the loss they’re already taking. The exception to this could be a major repair that the buyer’s lender requires in order to approve the loan – foundation, roof, heat and A/C for example.
It can be very disconcerting for the homeowner and all parties involved to endure this lengthy process only to have a potential buyer walk away at the last minute. This doesn’t happen often, but if it does, there is some good news. The Short Sale package (and sales price) has already been approved by the lender, so all that’s needed is a new buyer and a new purchase contract.
Most times, once Short Sale approval is received, both the seller and buyer are excited to move the process forward to a successful closing. Homeowners are so emotionally involved, and understandably so, with their particular situations; they’re often unaware that some of the major lenders are completely inundated with Short Sale and foreclosure files.
We were “enlightened” by one of the country’s largest lenders that their Short Sale negotiators regularly have 1,000 files to work at any given point in time. Hence, another reason why Short Sales are anything but short!
We encourage homeowners across the United States to get educated on the options available should they become financially distressed. Short Sales are a great tool, providing relief to all parties.
Just remember to choose a REALTOR® with a proven Short Sale track record to negotiate on your behalf. Making the right choice can mean the world of difference to your financial future.
Based on The Field Guide to Short Sales. Copyright © 2010 by Tom Branch & Gina Branch.
By Tom Branch, on September 7th, 2010
The easiest way to understand the Short Sale process is to think about qualifying for a mortgage. When you apply for a mortgage, the lender reviews your recent bank statements, pay stubs, tax returns, etc. to determine your ability to repay the mortgage.
When you apply for a Short Sale, it’s like undoing a mortgage. The lender will want to see the same documentation, along with a hardship letter, to determine your inability to repay the mortgage. If you can do this successfully, the lender will likely approve a Short Sale.
Below is a list of documents that comprise a complete Short Sale package:
• Bank Statements for prior two months
• Pay Stubs for prior 30 days
• IRS Tax Returns for prior two years
• Hardship Letter
• Authorization to Release Information
• Residential Real Estate Listing Agreement
• Executed Purchase Contract
• Lender Pre-approval Letter for Buyer or Proof of Funds for cash offers
• Preliminary Settlement Statement
Some lenders may require other documents such as an Arms-Length Affidavit and a Short Sale Contract Addendum which they will provide.
If the package arrives for lender review incomplete, oftentimes the lender will just move the file aside and pick up the next one on the stack. If the real estate agent isn’t diligent about following up with the lender, your file could just sit on the lender’s desk indefinitely with no action being taken. In the mean time, you’re moving ever closer to foreclosure.
The important thing is working with a REALTOR® who understands the process, knows the proper documents to gather, knows how to submit a complete package, and regularly follows up with the lender.
Based on The Field Guide to Short Sales. Copyright © 2010 by Tom Branch & Gina Branch.
By Tom Branch, on September 3rd, 2010 
More than 80 percent of distressed homeowners who go into foreclosure have never contacted their lender or a real estate professional for help. That’s a staggering number when help and relief are available.
In this blog, part of a multi-part series, we’ll discuss the different pit stops and road blocks along the Short Sale path; who the players are, what documents are required, and we’ll give a cursory overview of how Short Sales work. We’ll explore these concepts in more detail as we apply them to real world situations throughout the series.
An important thing to understand about Short Sales is that the process is anything but “short.” The only thing “short” about a Short Sale is the payoff to the lender. Whether you are a buyer or a seller, patience is your friend while the real estate professional negotiates the Short Sale with the lender. Otherwise your hair will gray at an alarming rate.
The first thing the homeowner needs to prepare for is explaining the hardship. Lenders do not care if you simply owe more now than the house is worth; they are looking for a valid hardship. You originally qualified for the mortgage and the lender is looking to see what has changed financially. A decrease in the home’s value alone is not qualification for a Short Sale. So what is?
Examples of valid financial hardships are: Loss of Job, Reduced Income, Mandatory Job Relocation, Business Failure, Death of a Spouse or Family Member, Severe Illness, Medical Bills, Divorce or Separation Payment Increase, Mortgage Adjustment, Insurance or Tax Increase, Military Service, Damage to Property, Too Much Debt, Inheritance, and Incarceration.
While not an all-inclusive list, it’s a good start. If you’re able to prove any of these hardships, the lender will seriously look at your case.
The easiest way to understand the Short Sale process is to think about qualifying for a mortgage. When you apply for a mortgage, the lender reviews your recent bank statements, pay stubs, tax returns, etc. to determine your ability to repay the mortgage.
When you apply for a Short Sale, it’s like undoing a mortgage. The lender will want to see the same documentation, along with a hardship letter, to determine your inability to repay the mortgage. If you can do this successfully, the lender will likely approve a Short Sale.
In Anatomy of a Short Sale, Part 2, we’ll look at what makes up a Short Sale Package.
Based on The Field Guide to Short Sales. Copyright © 2010 by Tom & Gina Branch.
By Tom Branch, on August 31st, 2010 
Regardless of the reasons used to explain the current mortgage crisis in the United States, the grim reality is that more homeowners are in financial distress than at any other time in the history of residential real estate, according to the Distressed Property Institute.
Hence, real estate Short Sales. If you’re not yet familiar with them, you soon will be. They are reshaping the way lenders liquidate homes in default. Historically, these homes would simply be foreclosed upon. Today, the Short Sale offers a favorable alternative.
Nolo’s Plain-English Law Dictionary defines a Short Sale as, “a sale of a house in which the proceeds fall short of what the owner still owes on the mortgage.” The lender decides that selling the house at a moderate loss results in less loss and expense for the bank than a foreclosure. Both the lender and the borrower (homeowner) must consent to the Short Sale process.
You may think Short Sales were created in response to the housing market meltdown in 2007, but they have been around for years. They have not been widely used in the past for two reasons:
– Until just recently, the lender could seek a deficiency judgment against the borrower for the amount of the loss. Laws vary from State to State, but the lender was able to garnish wages, engage a collection agency to collect the debt, or seek other legal relief.
– The lender can elect to forgive all or a portion of the mortgage balance. However, until 2007, the amount forgiven became taxable income. The lender simply issued an IRS Form 1099 to the borrower. The tax implications were dramatic. If the lender forgave $100,000 and issued an IRS Form 1099 to the borrower for the same amount, the borrower potentially wound up owing the IRS tens of thousands of dollars depending on their tax rate.
The Mortgage Forgiveness Debt Relief Act was a major piece of legislation passed by Congress and signed into law by President George W. Bush. The Act offered relief to homeowners, who, after a Short Sale, owed taxes on the forgiven mortgage debt. This relief is great news! Most homeowners no longer have to pay taxes on that forgiven debt. The Act applied to debts forgiven between 2007 and 2009, but was extended through 2012 by the Economic Stabilization Act of 2008.
The Home Affordable Foreclosure Alternatives (HAFA) Program that went into effect April 5, 2010 is a huge step forward in improving the Short Sale process. It requires borrowers to be fully released from future liability for their first mortgage debt, and, if a second lender receives an incentive under HAFA, that debt as well. Lenders cannot ask for cash contributions or promissory notes from borrowers, and deficiency judgments are not allowed. It also places timelines on the lenders to approve or deny Short Sale packages.
Why are these three pieces of legislation important? They changed the Short Sale from a tool that was not widely used in the past to one we feel offers the best solution to distressed homeowners, lenders, purchasers, the neighborhoods where these homes are located, and the housing market in general.
With the economic downturn that began in 2008, many homeowners lost their jobs. Others are going through a divorce or have had a spouse pass away. Losing that income makes it very difficult, if not impossible, to keep up with mortgage payments.
Most of the individuals or families we consult with would rather lose anything but their home. They often stop paying credit card bills or even car notes in an effort to keep their home. Eventually though, they just can’t keep up with the mortgage. That’s where we can help with a Short Sale. Sadly, 80% of Americans facing foreclosure have never picked up the phone and talked with their lender or a real estate professional.
Watch for Part 2 in the series where we will begin to explore The Anatomy of a Short Sale
Excerpt from The Field Guide to Short Sales. Copyright © 2010 by Tom & Gina Branch.
By Tom Branch, on October 23rd, 2011 
This is a common question among distressed homeowners we work with. It’s an easy question to ask, but the answer is complicated and constantly changing.
There are many variables involved when trying to figure out when someone will be able to purchase a home after a foreclosure or a short sale; however, the general guidelines that FHA, Fannie Mae and Freddie Mac follow when considering a loan after a short sale or foreclosure are:
Short Sale with FHA loan
• Can purchase right away with no mortgage default/late payments
• 3 year wait if in default or late payments at the closing
• Reduced wait if the borrower has re-established good credit and can show more qualifying circumstances *
Short Sale with Fannie Mae Loan
• 2 year wait if the borrower puts 20 % down
• 4 year wait if the borrower puts between 10% to 20% down
• 7 year wait if the borrower puts less than 10% down
• 2 year wait if the borrower can show extenuating circumstances and puts more than 10% down *
Short Sale with Freddie Mac Loan
• 4 year wait before being able to get a loan
• 2 year wait if the borrower can show extenuating circumstances *
Foreclosure with an FHA Loan
• 3 year wait before being able to get a loan
• Reduced wait if the borrower can show extenuating circumstances and re-establishes good credit *
Foreclosure with a Fannie Mae Loan
• 7 year wait from the completed foreclosure sale date
• 3 year wait if the borrower can show extenuating circumstances. Additional underwriting requirements apply for 4 years after a 3 year waiting period.
• 7 year wait for a 2nd home, cash out re-financing, or an investment property
Foreclosure with a Freddie Mac Loan
• 5 year wait from the completed foreclosure sale date
• 3 year wait if the borrower can show extenuating circumstances *
*Qualifying/Extenuating circumstances are not applicable in most situations
This list does not cover all circumstances so always talk with an experienced mortgage professional about your specific situation.
Source: Townsquare Financial
By Tom Branch, on January 5th, 2011  Base Photos Licensed from iStockPhoto David and Wendy Miller own a beautiful four bedroom home in the suburbs where they’re raising their two young children. They have a large wooded yard for summer fun, backyard barbecues, and where their dog, Jake, loves to chase squirrels.
The Millers have lived on Cypress Drive for seven years and have become close friends with the neighbors around them. The children take turns playing at each other’s houses, and the adults frequently get together on the weekends for neighborhood cookouts. While the Millers have the same everyday stresses as the typical American household, they are a genuinely happy family.
Then a bomb drops out of the clear blue sky. David gets called into his boss’s office and is told the company has to lay off several employees due to the weakening economy, and he is one of them. David is completely shocked. He’s worked for this company for 10 long years and has given it his all. And now to be let go with just two weeks’ notice? How will he tell Wendy? Just the thought makes him sick to his stomach.
As a Business Analyst for a large corporation, David earned $60,000 a year plus full benefits. Wendy works as a Marketing Manager in the hospitality industry and brings home about $50,000 a year. Losing more than half the household income will put a huge financial strain on the Millers.
David shuffles through the door at the end of a devastating day and breaks the bad news to Wendy. After the initial shock and panic, they quickly formulate a plan to keep their heads above water. David has a couple weeks’ notice and then he’ll be eligible for unemployment. In the mean time, he’ll hit the pavement hard looking for a new job. They’ll cut out most of their discretionary spending, and hopefully there won’t be too much down time between jobs.
Unfortunately, it seems like no one is hiring. Days turn into weeks and weeks turn into months and David is still without work. Something has got to give. The credit cards are now maxed out, and the bills that are being paid are being paid late.
Another month passes. The Miller’s hard earned savings is gone, and the mortgage is looming. As hard as they try, they just cannot make their money stretch far enough to cover the house payment this month. Same with the next month.
David and Wendy are horrified that they might lose their home to foreclosure. What will their neighbors, friends and families think? They are honest, responsible adults and have never had problems managing money or paying their bills on time. Their pride is hurt, they are terribly embarrassed, and don’t know where to turn.
This scenario is quite common. Most of the homeowners we help are good people who have just had bad things happen in their lives. We encourage homeowners across the United States to get educated on the options available should they become financially distressed. Short Sales are a great tool, providing relief to all parties.
Just remember to choose a REALTOR® with a proven Short Sale track record to negotiate on your behalf. Making the right choice can mean the world of difference to your financial future.
David and Wendy Miller own a beautiful four bedroom home in the suburbs where they’re raising their two young children. They have a large wooded yard for summer fun, backyard barbecues, and where their dog, Jake, loves to chase squirrels.
The Millers have lived on Cypress Drive for seven years and have become close friends with the neighbors around them. The children take turns playing at each other’s houses, and the adults frequently get together on the weekends for neighborhood cookouts. While the Millers have the same everyday stresses as the typical American household, they are a genuinely happy family.
Then a bomb drops out of the clear blue sky. David gets called into his boss’s office and is told the company has to lay off several employees due to the weakening economy, and he is one of them. David is completely shocked. He’s worked for this company for 10 long years and has given it his all. And now to be let go with just two weeks’ notice? How will he tell Wendy? Just the thought makes him sick to his stomach.
As a Business Analyst for a large corporation, David earned $60,000 a year plus full benefits. Wendy works as a Marketing Manager in the hospitality industry and brings home about $50,000 a year. Losing more than half the household income will put a huge financial strain on the Millers.
David shuffles through the door at the end of a devastating day and breaks the bad news to Wendy. After the initial shock and panic, they quickly formulate a plan to keep their heads above water. David has a couple weeks’ notice and then he’ll be eligible for unemployment. In the mean time, he’ll hit the pavement hard looking for a new job. They’ll cut out most of their discretionary spending, and hopefully there won’t be too much down time between jobs.
Unfortunately, it seems like no one is hiring. Days turn into weeks and weeks turn into months and David is still without work. Something has got to give. The credit cards are now maxed out, and the bills that are being paid are being paid late.
Another month passes. The Miller’s hard earned savings is gone, and the mortgage is looming. As hard as they try, they just cannot make their money stretch far enough to cover the house payment this month. Same with the next month.
David and Wendy are horrified that they might lose their home to foreclosure. What will their neighbors, friends and families think? They are honest, responsible adults and have never had problems managing money or paying their bills on time. Their pride is hurt, they are terribly embarrassed, and don’t know where to turn.
This scenario is quite common. Most of the homeowners we help are good people who have just had bad things happen in their lives. We encourage homeowners across the United States to get educated on the options available should they become financially distressed. Short Sales are a great tool, providing relief to all parties.
Just remember to choose a REALTOR® with a proven Short Sale track record to negotiate on your behalf. Making the right choice can mean the world of difference to your financial future.
Based on “Avoiding Foreclosure – The Field Guide to Short Sales”, Copyright 2010 – Tom & Gina Branch
By Tom Branch, on November 30th, 2010 According to the Distressed Property Institute, more than 80 percent of distressed homeowners who go into foreclosure have never contacted their lender or a real estate professional for help. That’s a staggering number when help and relief are available.
 Licensed from iStockPhoto Without fail, our phone rings off the hook near the end of every month from desperate homeowners looking for help. After checking the local foreclosure lists, we often find that the house is already scheduled for foreclosure the following week. At that point, it’s nearly impossible to get a Short Sale in place to stop it.
An important thing to understand about Short Sales is that the process is anything but “short.” The only thing “short” about a Short Sale is the payoff to the lender. The sooner the homeonwer contacts someone for help, the more time is available to work the Short Sales process.
We encourage homeowners across the United States to get educated on the options available should they become financially distressed. Short Sales are a great tool, providing relief to all parties.
Just remember to choose a REALTOR® with a proven Short Sale track record to negotiate on your behalf. Making the right choice can mean the world of difference to your financial future.
Read our multi-part blog titled, “Short Sales 101“
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