FREQUENTLY ASKED QUESTIONS ABOUT SHORT SALES
AND BANK OWNED PROPERTIES





Jan Adams
Your Florida Gulf Coast Beach Realtor

1. What is a real estate short sale
A real estate short sale is a form of agreement between the seller of a home in the beginning stages of foreclosure and their lender, allowing the home to be sold for less than the existing loan balance outstanding. The mortgagee would accept less than the loan amount in order to avoid a foreclosure proceeding. This short sale would result in a substantially discounted purchase price for the buyer of the home. The buyer would then proceed with the purchase of the home much the same as in any conventional realty transaction.

2. How late in the pre-foreclosure process can you start a short sale?
Depending on individual state law and regulations, a foreclosure can proceed as quickly as 35 days from the date the notice to the borrower is filed. For that reason, time is of the essence and you should allow a window of no more than 60 days to effectuate a lender approved short sale.

3. Will a lender allow a real estate short sale when the seller has some a good amount of equity?
If the home has some considerable amount of equity, the lender may choose to continue with a traditional foreclosure proceeding to regain title to the property and dispose of it at a market price. Given the current state of affairs with the real estate market, the home will most likely be over encumbered, hence the reason for the short sale in the first place. A glut of homes for sale in the market area of the home may make the lender think twice about taking title to the property.

4. What documents are necessary to proceed with a short sale?
The individual documents necessary to proceed with the short sale will depend on the lender. Typically the lender will require hardship letter detailing the circumstances behind the short sale. A signed, valid purchase and sales contract, preliminary HUD-1 settlement statement and a preliminary estimate of proceeds to the lender. There may be additional requests for more detailed information on the financial condition of the seller, ie; pay check stubs, bank statements, a personal financial statement and monthly budget assessment, amongst other things.

5. Will the seller’s credit rating be affected if they allow a short sale on their property to occur?
While it is up to the individual lender to decide what to report, what often happens is the loan will report as "paid" on their credit report. While that good news the bad news is that there will likely be a reference that says "settled for less than originally owed" or something similar. It is certainly more advantageous to have the short sale referenced than to have a foreclosure on their credit report.

6. Will a lender allow the seller to make a profit on a short sale?
By the nature of the transaction, the seller is not going to make a profit on the short sale. They may have extracted equity from a previous refinance of the home, but their current loan balance will be higher than the selling price of the home.

7. If a seller is in bankruptcy, will that affect the short sale of the property?
Absolutely, as most lender would not consider a short sale if the homeowner is in the middle of a bankruptcy proceeding. Negotiating a short sale between the parties is considered a collection activity and such a negotiation is prohibited in bankruptcy.

8. Will the bank or lender require an appraisal on the home in a short sale?
Most lenders will require that a full appraisal be submitted in the short sale package. Some may only require a BPO or brokers price opinion. The lender will need some formal assessment of the value of the home in order to make a decision as to accept or reject the short sale offer.

9. Are there tax implications in the short of real estate.
Much like the issue of credit reporting, the circumstances are individual to the lender. As a short sale represents a loss for the lender, they can report the amount lost a debt forgiveness to the seller. If a formal tax form 1099 is filed, the seller may be responsible for paying taxes on the amount of debt forgiveness.

10.Why would a lender allow a short sale to occur.
Quite simply, it may benefit all the parties involved in the transaction. The seller is relieved of the home they cannot afford. A costly foreclosure proceeding by the lender is avoided and the buyer purchases the home at an attractive



WHERE IS MADEIRA BEACH?
Madeira Beach is a city in Pinellas County, Florida, United States bordered on the west side by the Gulf of Mexico. The population was 4,511 at the 2000 census. As of 2004, the population recorded by the U.S. Census Bureau is 4,492[3]. Those living in this small (2 miles long) Florida city are within minutes of the beach if they don't live right on it already. The area is primarily residential with little or no industrial or sizeable service business. Residents are mostly supported by commercial interests outside the area and a large number of residents are retirees. CLICK HERE TO READ MORE

WHAT ARE THE SURROUNDING BEACHES AND PLACES OF INTEREST?
There are lots of them and a convenient map to locate them. CLICK HERE TO SEE

WHAT IS A SHORT SALE?
In real estate, a short sale is when a bank or mortgage lender agrees to accept less than the full amount of the mortgage due to an economic hardship on the part of the borrower.  Many lenders will agree to accept the proceeds from a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments.

WHAT IS AN ACCEPTABLE ECONOMIC HARDSHIP?
In order for a lender to accept a short sale, the borrower must have a demonstrable financial hardship. They will have to identify this hardship through a signed letter that will be submitted to the mortgage company along with additional documentation.
The financial hardship must be one that is preventing them from being able to pay the mortgage. Examples of acceptable financial hardships are:
1.Loss of Job
2.Business Failure
3.Damage to Property
4.Death of a Spouse
5.Death of family members
6.Severe illness
7.Inheritance of a home that is heavily mortgaged
8.Divorce
9.Mandatory Job Relocation
10Medical Bills
11.      Military Service
12.      Payment Increase or Mortgage Adjustment
13.      Insurance or Tax Increase
14.      Reduced Income
15.      Separation
16Too much debt
17.       Incarceration

WHAT DO I DO NEXT?
  • 1.    Our Listing Agent will do the research necessary to determine your home's worth in the current marketplace.  Using a checklist, the agent will discuss the attributes of your home to ensure proper valuation.  If we find the home to be worth less than what you owe, we'll start the short sale package.
  • 2.     You give us the name of your lender(s).
  • 3.    We'll give you ALL of the forms required by your lender(s) for you to fill out for the short sale request.  This includes the documents our short sale team needs to facilitate the negotiations.
  • 4.    You, the seller, fill out ALL the required documents and provide the financial information required by the lender.  These documents will include 2 months of pay-stubs, 2 months of bank statements, the 2 most recent year's tax returns (1040´s with W-2s) and a written authorization. Lenders will not disclose any of your personal account information without written authorization.  When you work with us you will need to provide an authorization to release information form, which we will provide to you. This will give our short sale team permission to speak with the lender on your behalf about a short sale.
  • 5.   You, the seller, write a hardship letter which states how you got into this financial situation and why you have not or cannot continue to make your mortgage payments. You are basically making a plea to the lender to consider a short sale on your property. Lenders are not out to get you and can understand if you lost your job, were hospitalized or some unforeseen event(s) led to your current financial situation. This includes the market depreciating. Dishonesty or conducting criminal behavior is illegal and if the truth comes out you may be subject to legal repercussions.
  • 6.   You sign an exclusive listing agreement with Weichert®, Realtors Sun Sand & Sea Homes for 6 months.  All the terms of the listing agreement are contingent upon the lender approving a short sale. We will negotiate with the lender to help you stay in the home until it is sold. 
  • 7.    Once we have all the documents our short sale team will take over.  You will never have to talk to your lender again, unless you want to.
  • 8.   We will aggressively market your property including lowering the price periodically until your property is under contract.  Without a contract on your property a short sale cannot happen.  The contract is contingent upon the approval of the lender of the price.  Once the contract has been accepted the short sale team will submit the offer to your lender. 
  • 9.   The bank will review the offer and order a Broker´s Price Opinion by an unrelated third party. Your listing agent will meet them at the property to show them the local comparable properties, hand them the MLS printouts of those properties, and explain the current neighborhood market conditions.  When property values are declining and the price you bought your home or condo for is less than what you can sell it for; this becomes a major factor for a short sale.  The Broker´s Price Opinion should show the lender what home values are in your neighborhood and confirm the value is less than what you owe on the mortgage.
  • 10. The bank will then make a determination if they are willing to accept the market offer.  When they do, we'll get an acceptance letter from the bank and we can move towards closing.
  • 11.  Hopefully, at this point the lender is seriously considering all the information that has been provided. At this time your short sale team is doing their best to help the lender understand why the short sale is the best option in this circumstance.  If the short sale is approved the closing date of the property should be 30-60 days away.


WHAT CAN I EXPECT?
  • You can expect to have more than 1-3 showings per week on your property.  This is because your home will be priced below market value in order to get offers.

  • You can expect to have a lot of time "waiting around" for the bank to respond.  This is completely normal.  Banks are currently overwhelmed with the number of short sales and foreclosures they are processing.  Look at Countrywide, they had to lay off 20,000 people, yet their loss mitigation department has more work than ever.  They have less people to do more work.  It takes patience on your part and on the Buyer´s part.

  • You can expect that we will work hard and diligently on your file.  No stone will be left unturned in the negotiations.

  • You can expect this process to be longer than a normal sale.  There are banks involved and they don't like losing money.

WHAT HAPPENS AFTER THE SHORT SALE IS COMPLETE?
At the conclusion of a successful short sale, you get the freedom to get on with your life without the worrying phone calls.  You do not receive any proceeds from the sale of your property.  All proceeds go the lender.  As part of the short sale process we will work with you to find you a new place to live for you to start your new life.

WHY ARE WE BETTER?
There are a lot of Realtors and short sale specialists popping up all over town.  Our short sale team has been trained and certified by the Harris Real Estate University.  We have been selling property for more than thirty years, through the good times and difficult times.  We are here to help you find the best solution for the situation you find yourself in.  Call us today, we listen and we can help.  That is our pledge to you.


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BANK OWNED PROPERTIES
With a bank owned property, there's no waiting. Unlike a short sale, the bank has already repossessed the home and is ready to sell! You can close within 30 days!

Bank foreclosures are also known as REO’s, which is an abbreviation for Real Estate Owned by lender. Bank owned foreclosures are properties that have been returned to the lender due to non-payment of a mortgage. Currently all lending institutions have numerous bank foreclosures for sale that they want to sell well below market price. They need to sell these properties and the cost of holding and maintaining these properties is high.

Buying Bank Owned Properties (REO)

So you’d like to buy a bank owned property?
You’ve watched the late-night infomercials and you’re ready to do the bank “a favor” and take a problem off their hands. Plus, you expect to make "a killing" in the process. Sounds great and it might just happen, but first you should take a look at some facts and get prepared.

REO vs. Foreclosure
An REO (Real Estate Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction. You see, most foreclosure auctions do not even result in bids. After all, if there was enough equity in the property to satisfy the loan, the owner would have probably sold the property and paid off the bank. That is why the property ends up at a foreclosure or trustee sale.

Foreclosure sales begin with a minimum bid that includes the loan balance, any accrued interest, plus attorney's fees and any costs association with the foreclosure process. In order to bid at a foreclosure auction, you must have a cashier's check in your hand for the full amount of your bid. If you are the successful bidder, you receive the property in "as is" condition, which may include someone still living in the property. There may also be other liens against the property.

Since what is owed to the bank is almost always more than what the property is worth, very few foreclosure auctions result in a successful sale. Then the property "reverts" to the bank. It becomes an REO, or "real estate owned" property.

REO Properties For Sale
The bank now owns the property and the mortgage loan no longer exists. The bank will handle the eviction, if necessary, and may do some repairs. They will negotiate with the IRS for removal of tax liens and pay off any homeowner’s association dues. As a purchaser of an REO property, the buyer will receive a title insurance policy and the opportunity to investigate the property.

A bank owned property might not be a great bargain. Do your homework before making an offer. Make sure that the price you pay (if you’re successful) is comparable to other homes in the neighborhood. Consider the costs of renovation, including time to complete them. Don’t get caught up in a ‘bidding war’ and pay over market value. It’s an old myth that “foreclosures” are a bargain.

How Banks Sell REO's
Each bank/lender works a little differently, but they all have similar goals. They want to get the best price possible and have no interest in "dumping" real estate cheaply. Generally, banks have an entire department set up to manage their REO inventory.

Once you make an offer to purchase, banks generally present a "counter-offer." It may be at a higher price than you expect, but they have to demonstrate to investors, shareholders and auditors that they attempted to get the highest price possible. You should plan to counter the counter-offer.

Your offer or counter-offer will probably have to be reviewed and approved by several individuals and companies. Even once an offer is accepted, the bank may insert wording like “..subject to corporate approval with 5 days."

Property Condition
Banks always want to sell a property in "as is" condition. Most will provide a Section 1 pest certification, but not unless you include it in your offer and negotiate the point. They will allow you to get all the inspections you want (at your expense), but they may not agree to do any repairs.

Your offer should include an inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not correct.

Even though you agreed to “as is," always give the bank another opportunity to make repairs or give you a credit after you’ve completed your inspections. Sometimes they’ll re-negotiate to save the transaction instead of putting the property back on the market, but don’t take it for granted.

Banks do not want to see a lot of proprietary disclosures; they are exempt from the California Seller’s Transfer Disclosure Statement (TDS-14). If there are real estate agents involved, either representing you or the bank, those agents are required to provide you their disclosure statements.

Most banks will not provide financing on their REOs but it doesn’t hurt to ask. Especially if the property has extensive damage and you are purchasing it "as is."

Making an Offer
Before making an offer, have your agent contact the the listing agent and ask the following:

Are there any inspection reports?
What work has the bank agreed to?
Is there a special "as is" form?
How long does it take the bank to accept an offer?
How does your agent deliver the offer?
Offers are usually FAXED to the bank. The listing agent needs your originals. There is no formal presentation. Keep in mind: nothing happens evenings and weekends (banks are closed)

Since there is no face-to-face presentation to the bank, provide the listing agent with a pre-qualification or better yet, a pre-approval letter and buyer biography. Make your offer easy to accept.

Hopefully these tips will manage your expectations. Remember that REO's sell at pretty close to full market value and are not the deals presented on late night television.




Short sale transactions for buyers and sellers
Properties listed for short sales with great views
Contact Us for short sales information
FAQs about our short sales transactions
Buyers of short sale Florida properties advantages in finding bargains
Sellers page for avoiding foreclosure on Florida property
Sitemap for pages of short sales
Glossary of real estate terms including short sales
Community links to short sales in Florida
News on florida foreclosures and florida bargains
florida bank owned properties for sale at bargain price
investor properties in florida


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FAQs on Florida gulf coast real estate short sales & florida gulf coast foreclosed bank owned property

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Jan  1.727.418.1861