The housing market in central Indiana is improving, with existing home sales up 28% and pending sales up 13.1%. However, short sales are also increasing as the value of some homes has dropped below what is owed. A short sale occurs when the lender accepts less than the full amount owed on a mortgage. Banks will consider short sales if the borrower can prove hardship, such as unemployment, and submits documentation like tax returns, pay stubs, and a broker price opinion to determine the current value of the home. The short sale process involves bank review and may require approval from the pooling service that holds the loan.

2. CENTRAL INDIANA MARKET
Housing industry in central Indiana is making
respectable gains.
 Sales of existing homes jumped 28%
 New Listings decreased 14.7%
 Pending Sales are up 13.1%
 Months Inventory down 12.8 % to 7.6 months
 Median sales price up .3% over three months

3. IMPACT ON THE HOUSING MARKET
Speculators
Easy Money
Low risk for banks
High Demand
Lack of check and balance

4. HOUSING MARKET COLLAPSE
Foreclosures
Bankruptcies
Short Sales

5. WHAT IS A SHORT SALE?
A short sale happens when the lender is
shorted on a mortgage, meaning the lender
accepts less than the total amount that is
due. If the mortgage is $100,000, but the
value of the home is $90,000, there is a
$10,000 short, not including costs to close
the sale such as real estate
commissions, taxes, recording fees, title and
escrow charges.

6. WHAT IS NOT A SHORT SALE
If the property owner has the funds and pays
the difference between the
mortgage, $100,000, and actual value
$90,000 plus expenses. The seller walks
away from the property without any
blemishes on their credit.

7. QUALIFICATIONS FOR SHORT SALE
The Home’s Market Value has Dropped
 Comparable sales substantiate the home is worth
less
 Unpaid balance may include a prepayment penalty
Mortgage is in or Near Default Status
 Lenders would not consider a short sale if payments
were current, this is no longer the case.

8. ACCEPTABLE SHORT SALES REASONS
Unemployment/reduced income
Divorce
Medical Emergency
Job transfer out of town
Bankruptcy
Death

9. REQUIRED FINANCIALS
 Letter of authorization, which lets your agent speak
to the bank.
 Preliminary net sheet
 Completed financial statement
 Seller’s hardship letter
 2 years of tax returns
 2 years of W-2s
 Recent payroll stubs
 Last 2 months of bank statements
 Comparative market analysis

10. REASONS THAT DON’T QUALIFY
Bad purchase decision
Unhappy with the neighbors
Buying another home
Pregnancy
Moving into an apartment

11. ARMS-LENGTH AFFIDAVIT
 Document created by a short sale bank in attempt to prevent
sellers from selling to a relative and to curb mortgage fraud.
Banks do not want sellers to profit from a short sale.
What does it contain
 Legal address
 No party to the short contract is related via family or business
 No hidden terms on purchase agreement
 Seller can not rent back nor regain title
 No parties will receive any compensation except for real estate
agents.

12. SHORT SALE PROCESS AT THE BANK
Bank acknowledges receipt of the file
Negotiator is assigned
BPO is ordered
Second negotiator maybe assigned
File is sent for review or to the Pooling Service
Agreement
Bank asks all parties to sign Arm’s Length
Affidavit
Bank issues a short sale approval letter.

13. POOLING SERVICE AGREEMENT
About two-thirds of the loans made since 2005
have been securitized. Securitization is a
process that involves gathering hundreds of
loans into one package and selling that
package in the secondary market. Often the
purchaser is a trust. Trusts are comprised of
investors.
After the loans are pooled and sold, the trust
hires a service provider to collect monthly
payments and distribute that money to the
investors. That securitization agreement is
called a pooling and servicer agreement or
PSA.

14. HOME INVOLVED IN DIVORCE
Determine Value vs. Amount Owed
Broker Price Opinion
Required Documents
Prior Closing Documents
Mortgage Documents
Property Tax Statement
HOA Documents
List of improvements made to property