SHORT SALES
 
     It was usually hard for the lender or bank to approve a short sale. However due to the current mortgage crisis, the lending institutions have changed and Short Sale transactions have become much more negotiable.
 
     There are three required elements to qualify as a short sale:
1)   Hardship (material change in the financial situation of a homeowner that is or will affect their ability to pay their mortgage).
2)   Short Falls (Late Payments) or Current but provable future’s inability to pay due to hardship.
3)   Insolvency (not being able to Pay Down the mortgage – The homeowner has to owe more than he/she has or he/she does not have liquid cash or assets that could be used to buy down his/her mortgage).
 
Examples of Hardship:

     Job loss or mandatory job relocation, Income reduction, Business failure, Death of a spousal, Death of a family members, Severe illness, Inheritance, Divorce, Medical bills, Payment increase or mortgage adjustment, Tax or insurance increase, Separation, Too much debt, Incarceration, etc.
 
     A Certified Short Sale Specialist (who earned the designated title based on proper training and experiences in negotiations with lending institutions), prior to taking the SS listing, will need to do some estimations of the balance of the sale to show the lenders what they are going to get back after the sale. A complete package of short sale document, including the executed offer, will be sent to the lenders for review and approval. Negotiations will start once the lenders have reviewed the executed offer.
 
     The time length for the lenders to approve the short sale depends on the approval of the agreeable terms that were negotiated. It is worth to be mentioned here that while seller can negotiate highest and best terms with multiple offers at the same time, only one contract can be accepted and signed between two parties. It would be a breach of contract to have a house sold to many different buyers with many different contracts!
     An inexperienced agent who’s handling negotiations often makes mistake by submitting all offers to the lenders without having any of them shown as a valid contract (acceptance of an accepted offer between buyer and seller). The lenders will of course pick the highest offer to retrieve the loss as much as possible. If the buyer is qualified then the transaction could go smoothly. Unfortunately, the highest offer sometimes may not be the best offer for many reasons (offered price way above the market value, buyers’ financial and employment qualifications, seriousness of the buyers with illogical offers, etc.). More importantly, in order for lenders to approve the sale, the contract reviewed by the lender should be valid (accepted and signed by both parties). Please check with your contract attorney for advices of contract law.
     Once the lender approves the sale, a written notice of approval will be sent. The SS specialist should check with the lenders to make sure the written letter is sent.
 
     Lenders can either forgive the debts, or require the borrower to sign the note for collectible debts, or go for a deficiency judgment depend on the type and terms of a loan program the borrowers first entered. If the loan is a purchase-money loan then it is forgiven in a short sale per California's law (Cal. Code Civ. Proc. § 580b). However, if the loan was a re-finance under “recourse” category, then the lenders may may pursue the remaining deficiencies, regardless of the sale special condition such as short sales or foreclosures.  More information of Short Sale can be found here.