Short Sale SellersSo, What is a Short Sale?
Homeowners are defaulting on their mortgages at a record pace across the country and many homeowners are begging their lender(s) give them relief or assistance to keep them from being foreclosed upon. There is an option to save those from entering foreclosure, called a Short Sale.
So, what is a short sale?
A short sale is what happens when the net proceeds from a sale of a property is not sufficient to cover the outstanding mortgage and the seller does not have the cash to pay the difference. The lender is asked to take less than the full amount owed in order for the sale to be completed.
Why is a short sale a good idea?
A foreclosure can have a great impact on a credit report and has a lasting effect for years to come while a short sale will cause a smaller impact on a credit report and last less.
Why would a lender want to agree to a short sale?
Lenders do not want to own homes as that isn’t their business. They are in the business of loaning money and the bank would like to steer clear of facing fees of close to $50,000 to $60,000 in foreclosure costs.
How does a short sale process work?
Most lender have a short sale package which contain documents for the seller to submit to have the short sale approved. The documents included would be: the hardship letter, seller’s financial statement, two most recent pay stubs, 2 most recent bank statements, two most recent tax returns, a copy of an agreement of sale with the buyer, and a copy of proposed settlement statement (HUD-1) demonstrating net monies to the lender. When the package is delivered, a negotiator is assigned to the file.
Some additional tips:
- It may take 60 to 90 days or even longer for a closing to take place for a buyer.
- Lenders are not properly staffed to take on the number of short sale requests. But be persistent and make frequent calls to their negotiation to insure the short sale is moved forward.
- You must negotiate the release of both the property and the underlying personal debt secured by the note. If you don’t do this, the lender may not forgive the personal debt.
- Make sure to consult an attorney and real estate agent who has been through this process before and has significant experience working with lenders.