Short sales are common these days. Santa Maria has 255 active short sale listings, Lompoc lists 72 short sales on the market, Nipomo has 14, and Arroyo Grande also has 14 active short sales. The difficult part is obtaining “lender approval” which adds delays to the process. Because approvals attach to a specific buyer, it is vital to find a committed buyer for your short sale. Often lenders require the process to start over if the buyer abandons their offer. This can draw out the process even further. But it is important to note that short sale transactions are closing all over the Central Coast. In the month of December, 18 short sales closed in Santa Maria (2 of these were my listings), 2 in Lompoc, 2 in Nipomo, and 1 in Arroyo Grande.
Will My Bank Still Approve My Short Sale If I Owe Twice What My Home Is Worth?
Many homeowners who are severely underwater ask this question. Generally, the reason a bank accepts a short sale is due to the hardship of the seller. It is not because the short sale offer is close to or far from the loan balance. Once hardship is established, the issue becomes the market value of the asset. If market value is half — market value is half — there is no way around that. But, it is your hardship that will qualify you for a short sale — not necessarily how much or little the bank is going to lose.
Now, there are other factors that can affect whether the short sale will be approved, like the presence of mortgage insurance, second lien holder demands, or a bad valuation; however the threshold issue will be hardship. Hardship is an issue that is discussed with much vigor among short sale agents and bank negotiators. However, despite what some would suggest, there is no clear cut answer. There are different standards among banks, investors, and servicers, and we are in a different type of time as well — the economy is down and mortgage lenders and investment bankers engaged in practices that contributed to this economic storm.
Some short sale agents argue that simply being severely underwater is not sufficient to qualify you for a short sale. I do not agree. Some short sale agents say that even if your home is worth half of what you agreed to pay, that if you can “afford” the monthly payment you must continue to pay. Even if those monthly payments are interest only and the rate is variable. I do not agree with that either. And that is, in part because often people think they can afford a payment, but they really can’t.
Many, if not most of my short sale sellers end up in my office after their accountant or CPA has advised them to do a short sale on their home or rental property. Their financial advisor understands that they really can’t afford to keep doing what they are doing, even if they don’t. How far you are underwater is a part of that analysis. Before listing as a short sale, I encourage potential clients to discuss these issues with their attorney and tax advisor, if they have not already. After those consultations, they often discover that they do have an argument for hardship that they can present to the lender before going the route of foreclosure or bankruptcy. The bank can then say yes or no.
If you are considering a short sale of your Santa Maria, Orcutt, Nipomo, or Arroyo Grande home, you should seek out an experienced short sale agent to guide you through this process. If you would like a short sale consultation, please call my office to schedule a meeting or a telephone consultation at (805) 938-9950.
Tni LeBlanc is an independent Real Estate Broker, Attorney, Short Sale Agent and Certified Distressed Property Expert (CDPE) serving the Santa Maria, Orcutt and Five Cities area of the Central Coast of California.
*Nothing in this article is intended to solicit listings currently under contract with another broker. This article offers no legal or tax advice. Those considering a short sale are advised to consult with their own attorney for legal advice, and their tax professional for tax advice prior to entering into a short sale listing agreement. Mint Properties is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.
Copyright© 2011 Tni LeBlanc *Will My Bank Still Approve My Short Sale If I Owe Twice What My Home Is Worth?*