Texas Title and Escrow For Short Sales

Adobe Title, LLC has the resources and the years of experience to serve you for Title Insurance and Escrow Settlement Closing services throughout the Short Sale process.

 

Short Sale Settlement

Short Sale Defined

A "Short Sale" is the sale of the house or the property with some portion of the debt is forgiven by the lender, in which the property is still under a mortgage or trust deed. The forgiven debt may be considered as an income to the seller and therefore may be taxable. The lender agrees to receive a payoff less than the mortgage balance on the loan issued.

 

Benefits of Short Sale - Advantages vs Disadvantages

A Short Sale (or a Preforeclosure Sale) is a good option for homeowners with little to no equity in their property or house. The main advantage of a Short Sale is avoiding foreclosure or bankruptcy. Filing an application to participate in Preforeclosure Sales Program does not guarantee an approval. The application process is lengthy and approval usually is based on the lender's review of all documentation provided by the owner. Good communication between the homeowner or the representing real estate agent and the lender (or the bank) commonly shortens the process with less difficulty. By choosing Short Sale a Mortgagor most likely can purchase a house within 2 years vs. a much longer time period (5 to 7 years) on a foreclosure option.

 

Short Sale/Preforeclosure Process

Homeowners can initiate the process by contacting their lenders for a preforeclosure request. The homeowner needs to submit the Hardship Letter to the lender for the Short Sale/Preforclosure application. The hardship letter states why the homeowner got behind on mortgage payments (such as losing her/his job, divorce, death in family, sickness, etc.). The lender will usually request additional documents such as, the homeowner's last two years tax returns, last 60 days pay stubs, last 60 days of bank statements, copies of investment accounts, and other documents indicating the owner's financial status. Then the lender will review the settlement package submitted. The lender will also need a Broker Priced Opinion (a BPO) for determining the market price for the house/property by comparing it with others in the market. The lender will then evaluate these documents to determine whether to approve the short sale.

 

Title and Escrow Short Sale/Preforeclosure Sale Length

It may take up to 60 days (rarely even longer) to get an approved offer from the lenders. Filling out the paperwork correctly and improving communications with the lender representatives are crucial aspects on completing the process quicker.

 

Short Sale/Preforeclosure Sale Facts by HUD

1. HUD (H.U.D. - U.S. Department of Housing and Urban Development) requires that mortgaged property be sold to a third party at arms length.
2. HUD requires the homeowners debt on the property include the unpaid principal balance and the delinquent interest as well. In addition to the principal and interest a partial claim amount has to be added if applicable.
3. HUD will pay up to $1,000 incentive to the homeowner if the short sale is closed within 90 days from the date of application. The amount will be reduced if it is over 90 days.
4. HUD will also pay an additional amount up to $1,500 for the junior liens after the incentive has been applied.
5. HUD allows up to 1% of the buyer's mortgage amount for closing cost to be included in the Seller's Costs on the HUD-1 statement for all new FHA-insured transactions.
6. HUD requires that the mortgagor should not be encouraged to default on the mortgage just for the purpose in choosing Preforeclosure or Short Sale.

 

Short Sale/Pre Foreclosure Sale Program GuideLines, Eligibility, Procedures by HUD

Short Sale/Preforeclosure Eligibility by HUD

1. The homeowner MUST be residing in the house/property.
2. The homeowner MUST be behind on her/his mortgage more than a month.
3. The homeowner MUST submit documents as the proof on reduction her/his income, or an unexpected expense increase in which either one will prove the homeowner needs to vacate the property.

 

Short Sale/Preforeclosure Procedures and Processes by HUD

1. HUD requires a copy of the revised "Information/Disclosure Form HUD-90035 to be mailed to any qualified Pre Foreclosure candidate.
2. HUD requires the lender obtain a standard "As Is" FHA appraisal filed by the requirements of a Valuation Analysis for Single Family One-to-Four-Unit Dwellings which helps to ensure the most current Fair Market Value used on the Pre Foreclosure Sale for the property.
3. HUD requires the lender obtain a title examination report to make sure that the title is clear and has no unresolved or impaired problems.
4. HUD requires using an Approval to Participate form to be used when the homeowner's application is approved for Short Sale/Preforeclosure Sale.
5. The Preforeclosure Sale period shall be 4 (four) months.
6. All promotional (marketing) efforts by the homeowner or her/his real estate agent should be reviewed by the lender on a monthly basis.
7. HUD requires a sale closing within 6 (six) months.

 

More on Short Sale

Preforeclosure Sale Frequently Asked Questions by HUD

Field Guide to Short Sales

 

* Reference Financial Publishing Company - www.financial-publishing.com
* Reference National Association of Realtors (NAR) - www.realtor.com
* Reference U.S. Department of Housing and Urban Development - www.hud.gov