Short-Sale

Short Sale Hardship Reasons

Short sales were designed for homeowners with real hardships. Below are some reasons that cause property owners to either have a financial hardship, a monthly income shortfall or become insolvent. Please note that lenders do not consider delinquency alone to be a hardship. If you can afford the payment but you are upside down on your mortgage, this is not considered a hardship by the bank.

Pre-determined Hardship FOR HAFA SHORT SALES: If you are 90 days or more delinquent and have a FICO score that is less than 620, you will be deemed to have a “pre-determined” hardship. Your servicer does not need to further validate the hardship to approve the HAFA short sale. However, they must execute a Hardship Affidavit prior to closing.

Death of Principal Mortgagor The delinquency is attributable to the death of the principal mortgagor.

Illness of Principal Mortgagor The delinquency is attributable to a prolonged illness that keeps the principal mortgagor from working and generating income.

Illness of Mortgagor’s Family Member The delinquency is attributable to the principal borrower having incurred extraordinary expenses as the result of the illness of a family member (or having taken on the sole responsibility for repayment of the mortgage debt as the result of the co-mortgagor’s illness).

Death of Mortgagor’s Family Member The delinquency is attributable to the principal borrower having incurred extraordinary expenses as the result of the death of a family member (or having taken on the sole responsibility for repayment of the mortgage debt as the result of the co-mortgagor’s death).

Marital Difficulties The delinquency is attributable to problems associated with a separation or divorce, such as a dispute over ownership of the property, a decision not to make payments until the divorce settlement is finalized, a reduction in the income to repay the mortgage debt, etc.

Curtailment of Income The delinquency is attributable to a reduction in the mortgagor’s income, such as a garnishment of wages, a change to a lower paying job, reduced commissions or overtime pay, loss of a part-time job, etc.

Excessive Obligations Same Income, Including Habitual Nonpayment of Debts The delinquency is attributable to the mortgagors(s) having incurred excessive debts(either in a single instance or as a matter of habit) that prevent him or her from making payments on both those debts and the mortgage debt.

Abandonment of Property The delinquency is attributable to the mortgagor(s) having abandoned the property for reason(s) that are not known by the servicer (because the servicer has not been able to locate the mortgagor).

Distant Employment Transfer The delinquency is attributable to the principal mortgagor being transferred or relocated to a distant job location and incurring additional expenses for moving and housing in the new location, which affects his or her ability to pay both those expenses and the mortgage debt.

Property Problem The delinquency is attributable to the condition of the improvements of the property (substandard construction, expensive and extensive repairs needed, etc) that defers funds that would have been available for the mortgage payment; mortgagor’s dissatisfaction with the property or neighborhood.

Inability to Sell Property Following an employment related transfer.

Inability to Rent Property Delinquency is attributable to mortgagor needing rental income to make the mortgage payments and having difficulty in finding a tenant following an employment related transfer.

Military Service The delinquency is attributable to the principal mortgagor having entered active duty status and his or her military pay not being sufficient to enable the continued payment of the existing mortgage debt.

Unemployment The delinquency is attributable to a reduction in income resulting from the principal mortgagor having lost his or her job.

Business Failure The delinquency is attributable to a self-employed principal mortgagor having a reduction in income and/or excessive obligations that are the direct result of the failure of his or her business to remain a viable entity or, at least, to generate sufficient profit that the borrower can rely on to meet his or her personal obligations.

Casualty Loss The delinquency is attributable to the mortgagor having incurred a sudden, unexpected property loss as the result of an accident, fire, storm, theft, earthquake, etc.

Energy-Environment Cost All other factors remained the same, but sharp increase in utility cost(s) deferred funds that would have been available for the mortgage payment or costs associated with the removal of environmental hazards in, or near the property.

Servicing Problems The delinquency is attributable to the mortgagor being dissatisfied with the way the mortgage servicer is servicing the loan or with the fact that the servicing of the loan has been transferred to a new mortgage servicer.

Payment Adjustment Delinquency began after either increase in P&I for ARM mortgage or after escrow analysis where one or more escrow item increased, including the spreading of the amount needed to repay an escrow shortage over the next year.

Payment Dispute The delinquency is attributable to a disagreement between the mortgagor and the mortgage servicer about the amount of the mortgage payment, the acceptance of a partial payment, or the application of previous payments that results in the mortgagor’s refusal to make the payment(s) until the dispute is resolved. Transfer of Ownership Pending The delinquency is attributable to the mortgagor having agreed to sell the property and deciding not to make any additional payments.

Fraud The delinquency is attributable to a legal dispute arising out of a fraudulent or illegal action that occurred in connection with the origination of the mortgage (or later).

Incarceration The delinquency is attributable to the principal mortgagor having been jailed of imprisoned (regardless or whether he or she is still incarcerated).

Find an experienced agent who has a track record for negotiating and closing short sales and has a fiduciary duty to you. We have a variety of resources that you can use to navigate your way through this short sale jungle. Perhaps the most effecient resource is calling us. Call 801-262-9985 or ask your questions via our contact page. We want you to be comfortable while you figure out a solution.

Themselves? When you cozy up to an investor, you have placed your fate into the hands of a bias moneymaker, not an unbiased third party. Would you EVER do that in a traditional transaction? Of course not! Promises should be scrutinized, in writing, and enforceable.

Too often the agent and seller set an unrealistic asking price in order to attract buyers. Since the seller’s mortgage company has the power to ultimately accept or deny offers and is based on their due diligence not the asking price. The bottom line is that the buyer needs to remain positive and patient, for 2-6 months, throughout the entire process, provided the listing agent is competent, creative and diligent.

If the seller has multiple loans (liens) owned by two different mortgage companies it is a lot more difficult to approve the short sale. This poses a great challenge to the listing agent processing the short-sales. Buyers should know that when the seller only has multiple loan(s) the chance of failure is greater than if the seller has one lien holder vs. two liens with different companies. A creative seasoned short-sale specialist can help the listing agent if that listing agent is learning how to process challenging short-sale transactions.

Because the sellers mortgage company is unconcerned with the asking price low-ball offers aren’t realized until the sellers mortgage company has received their independent price opinion, the Brokers Price Opinion (BPO). The Mitigator will counter the offer but if the BPO is much higher than the buyers offer the deal will likely fail. The buyer’s agent should be able to analyze the current sold comparable’s, actives and pending sales to help the buyer determine the likeliness their highest and best offer will get seriously considered.

In the early 2000’s short-sales were a niche market; today, they are all too common and the mortgage companies across America are ill prepared. Your agent should either help the listing agent or be able to advise you on whether they think the seller’s agent is competent to work with a lender that is overwhelmed, loses paperwork often, doesn’t communicate pro-actively, is evasive, and has multiple layers of approval. It’s a race against the attorney handling the foreclosure so diligence and creative ways to contact mortgage companies drowning in short-sale requests is essential to success.

The price of the home is based on being “short” of the loan balance not fair market value. Keep your options open and continue to actively look at multiple properties because the uncertainty of your price being accepted in a timely manner is high. Buyers must remain optimistic; the right property will come along. Most states allow a buyer to write multiple offers that are legal and risk-free with the proper contingencies.

The listing agent processing the short-sale MUST present the Sellers hardship effectively. If the seller has cash or equivalent assets or extraordinary expenses that aren’t considered necessary, the sellers mortgage company may require that the seller sign a note and participate in the loss. This has virtually no effect on the buyer as long as the seller cooperates but few sellers will sign notes as they may genuinely be downtrodden but the sellers mortgage company doesn’t believe the sellers hardship is worthy of a note-free approval.

Many Multiple Listing Services (MLS) advertise whether the short-sale price was previously approved. The catalyst for catapulting a short-sale to close is the BPO. If the seller’s short-sale package is complete, with an offer to purchase, the Mitigator will order a BPO. If that BPO comes back after the previous buyer abandon the transaction the seller’s agent can advertise a feasible price that will close much quicker than a short-sale lacking a BPO performed within 4 months. Most offers within 5-10% of the BPO are seriously considered depending on many factors your agent should know of, i.e. when is the trustee sale, when was the BPO performed, etc.

The seller’s mortgage company has all the power in approving short sales. The seller’s mortgage company is evasive and many of the details that influence the approval are unknown by the seller and listing agent. The Mitigator is rewarded for recovering more money for the seller’s mortgage company. The Mitigator may prefer a buyer with a large down payment while others just want the highest price regardless of down payment. Many buyers want to know if they will get a deeper discount for an all cash offer which is impossible to know upfront. As long as the buyer is working with a competent (and experienced) team, a low offer could be accepted expediently but you won’t know until you try.

When the sellers mortgage company hires an real estate agent specializing in REO properties to do a BPO they instruct the agent to return a value “AS-IS”, no repairs. If the buyer’s appraiser or lender requires repairs to be made, don’t expect the seller to do them and certainly don’t expect the seller’s mortgage company to do them. Occasionally a credit or discount will be given but that poses another problem, the buyer’s lender doesn’t allow monies to be escrowed for repairs unless weather is a factor, e.g., roof shingles in the winter time. Be prepared for a balancing act to address repairs under these circumstances.

Once an approval is granted the seller’s mortgage company logs it into their books. The Mitigator gets paid bonuses if that property is closed on-time. Don’t expect leniency from the sellers mortgage company, deadlines are rarely extended. Because of this, it is important that the buyer’s lender update and pursue underwritten approval once the BPO is completed. The buyer’s loan application must be fully underwritten and unconditionally approved subject ONLY to title and appraisal; hold the buyers loan officers feet to the fire! If the request is made early enough, many seller’s mortgage companies may grant an extension but it is wiser to assume it WILL NOT happen and be prepared to close earlier than later.