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 September 1st, 2010  Doug and Lorena Foster’s blog titled, “When The Wolf is Running The Hen House” struck a nerve with me.
“They are over and done with…” Despite their thoughts, Short Sales are going to be around at least through the end of 2012 when The Mortgage Forgiveness Debt Relief Act expires. If you need some background on the subject read my blog titled, “Short Sales 101 – Introduction.”
“Is this our new job? We don’t think so!” Short Sale listing agents are doing two and three times the work per closing but the end result is so satisfying. When I first meet with distressed homeowners and they realize there is a light at the end of the tunnel, it’s like the weight of the world is lifted off their shoulders. If this is my role for the next few years, I can live with it.
“Ultimately 9 out of 10 fail.” Trained and experienced Short Sale agents close 9 out of 10. The bigger problem is so many agents don’t have a clue how to list and close Short Sales and should not be attempting to provide services they are clearly not qualified to provide. Not on do they do a great disservice to their clients but they harm the profession and violate the Code of Ethics (for REALTORS®).
We’ve closed Short Sales in as little as 64 days from listing to funding. Do they all go that smooth? No, they do not. There are so many variables that can impact the timeline.
We’ve had buyers tie up a home in a contract while they looked for another property. We had a buyer enter into a contract and fail to disclose they had a home to sell. They were betting on months to get the short sale approved. I’ll bet both the agent and the buyers were choking when we had the sale approved in 22 days! Both terminated their contracts after we gave them notice the sale had been approved and left us to start the process again.
I’ve sold some properties four times to find a buyer who could close. I’m to the point that I interview every selling agent who brings me a contract. Do they understand the process? Have they prepared their clients for it as well?
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.
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 August 26th, 2010 
Another short sale closed! The sellers avoided foreclosure, the buyers purchased a nice home at a discount, and the lender did not have the losses involved with a foreclosure.
Many people feel that the nation’s economy rises and falls with the housing market. While this is often true, we believe the current housing crisis is a direct result of the economic downturn and massive job loss across the nation.
In the Short Sale community, the vast majority of homeowners did not get a bad loan or buy more house than they could afford; they’re just good, hardworking Americans who fell on bad times.
All indicators point to Short Sales being on the real estate horizon for the foreseeable future, at least through 2012, and maybe longer. Industry experts see another wave of distressed homeowners surfacing when the once popular Pay Option Adjustable Rate Mortgages (ARMs) begin to adjust in the coming months.
These mortgages allowed the borrower to essentially “pick a payment” that fit their budget in order to get into the house they wanted to purchase. These loans have the potential to negatively amortize and the rate will adjust upward – it’s just a matter of time. Pay Option ARMs were widely used in California and will begin adjusting soon.
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.
By Tom Branch, on August 24th, 2010 
Another short sale closed! The sellers avoided foreclosure, the buyers purchased a nice home at a discount, and the lender did not have the losses involved with a foreclosure.
Many people feel that the nation’s economy rises and falls with the housing market. While this is often true, we believe the current housing crisis is a direct result of the economic downturn and massive job loss across the nation.
In the Short Sale community, the vast majority of homeowners did not get a bad loan or buy more house than they could afford; they’re just good, hardworking Americans who fell on bad times.
All indicators point to Short Sales being on the real estate horizon for the foreseeable future, at least through 2012, and maybe longer. Industry experts see another wave of distressed homeowners surfacing when the once popular Pay Option Adjustable Rate Mortgages (ARMs) begin to adjust in the coming months.
These mortgages allowed the borrower to essentially “pick a payment” that fit their budget in order to get into the house they wanted to purchase. These loans have the potential to negatively amortize and the rate will adjust upward – it’s just a matter of time. Pay Option ARMs were widely used in California and will begin adjusting soon.
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.
By Tom Branch, on August 17th, 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.
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. If you are falling behind on your mortgage payments, don’t wait! For best results, please seek help from a qualified Short Sale Professional right away.
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. But first things first. None of this can happen until your house has been listed for sale and a workable contract for purchase has been received.
If you’re having problems paying your mortgage, please do not wait to seek help and advice from a qualified professional.
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