Short Sale - how short is short?

Asked by Sarah, Marin County, CA Fri Oct 12, 2012

How much of a loan do banks tend to forgive in a short sale situation? I know there are many factors and each bank probably has their own formula.... but how about some agents in Marin - what has been your experience?

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Sylvia Barry, MAS,CIPS,SRES’s answer
Sylvia Barry,…, Agent, Marin, CA
Sun Oct 14, 2012
Hi Sarah:

Some very good answers below. I have done quite a few short sales in the past few years and watched the evolution of short sales from lenders/Feds on how they handle/treat short sales, foreclosures, etc.

I agree, there is no set formula on how lenders in general will forgive a debt in a short sale situation.

Market condition, personal situation (details of hardship matters), loan situation, loan modification efforts, default status all are part of the equation. It also depends on the back-end investors' rules. Some lenders are extremely easy - no financial information required, others needs everything in detail. But again your personal situation matters a lot.

I can not stress enough to my clients, especially if they are in default - Time is of Essence.

This is all very personal. After you do the due diligence online, talk to a professional in person to address your issues will help a lot.

Sylvia Barry
1 vote
Mary Kay and…, Agent, San Rafael, CA
Sat Oct 13, 2012

There are a lot of factors to consider in a short sale situation. Market value of the home is the first determination. The bank/banks holding the loan/loans on a property want to make sure that the agreed upon sales price of the property is at market value. They also look at the borrower to assess the situation. Are there already missed mortgage payments, has the ability to pay changed since the loan was obtained due to unemployment, reduction in hours or pay, medical condition, marital status, etc.?? They typically will review the financial statement of the borrower, but in some cases, they don't. They check to see if the borrower has tried to do a loan modification, etc. The loan balances are not as much of a factor in determining if you qualify for a short sale and there are no set formulas for acceptable payoffs.

We have some preliminary information regarding short sale that we can send to you so that you have a better understanding of the process. We would also be happy to talk to you or meet with you to answer any questions that you may have and to assist you in exploring what possibilities might be available to you and your specific situation. Mary Kay holds the CDPE (Certified Distressed Property Expert) designation for short sales and the SFR (Short Sale and Foreclosure Resource) designation. We have completed many successful short sale over the years and have considerable experience.

We are here to help!!!

Mary Kay and Kathy
0 votes
James Deskins, Agent, Worthington, OH
Sat Oct 13, 2012

Although there is no "formula" and each bank is different, it stands to reason the the more upside down you are the less likely the bank will take a short-sale. In other words, if you are 10K upside down on a 300K morgage there is a good chance they can recoup their losses without having to foreclose.

The other factor is that some banks can come after you for the difference. So if they can, they are more likely to do a short-sale. That being said, banks rarely come after sellers for the balance owed.
0 votes
Laura Coffey, Agent, Santa Clarita, CA
Sat Oct 13, 2012
It depends on the market and the value is not what is owed. A seller has to provide evidence of a true hardship along with other documentation for the investor to decide if they will take market value over what is owed.
Sometimes they will ask the seller to contribute. The seller at that point can way their options on what they prefer to do.
In my opinion ING is the worst to deal with. I always let my clients know, no matter which side I represent, this probably won't be pretty.
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0 votes
Miguel Pared…, Agent, Novato, CA
Sat Oct 13, 2012
First you would need a hardship for the bank to consider a foreclosure. Then you would need to summit an an offer at the current market value. The bank pays more attention to what the home is worth now rather than how much it is forgiven. You may incur tax consiquences if you short sale. Set up a free no obligation appointment with my short sale team and we will evaluate your situation, answer your questions, and find a solution. It can be emotional and overwhelming but we are here to help.
You may contact me at 415-233-3235 or email me at
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Ann Ryan, Agent, Doral, FL
Sat Oct 13, 2012
I think it has a lot more to do with the ability of the seller to pay the loan... if you have $100,000 in investments, you can't expect to have $50,000 forgiven by the bank. You're much more likely to be approved if: you're unemployed, have lower income, or have other negative circumstances that have befallen you.
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Walter 'Skip'…, Agent, Brea, CA
Sat Oct 13, 2012
Hi Sarah,
To my knowledge there is no formula. If you have hardship and can document that you can no longer make the payments, you would be eliglble for a short sale. The difference between the current market value of the home and what you owe (plus costing costs, back taxes and other liens)would determine the short amount. This difference can be significant. Remember is you are considering a short sale the Mortgage Debt Relief Act is set to expired 12/31/2012.
Good luck,
0 votes
inna ivchenko, Agent, Calabasas, CA
Sat Oct 13, 2012
I've never heard of a 'formula' for a bank. If someone knows the answer, i'd like to know that as well:)

Each lender has its own short sale procedure and policies.
One bank may forgive a large amount, another may not.

Yet, think about it:
If a homeowner bought a property for $1mln in 2005 and now the market value is only 500k, what can they do about it? To foreclose this upside down homeowner who is not able to pay his mortgage anymore( due hardship)? Short sale would be a more desirable solution if they have a buyer who is willing to step in and pay a fear price for the property.
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