What’s A Short Sale?

 

A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.

When lenders agree to do a short sale in real estate, it means the lender is accepting less than the total amount due. Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose; moreover, not all sellers nor all properties qualify for short sales.

WHAT TO EXPECT?

Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect.

Call the Lender

You will need to speak to someone in the LOSS MITIGATION DEPARTMENT or LOAN WORK OUT DEPARTMENT

Submit Letter of Authorization

Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, title company or attorney, the lender will be more cooperative if you write a letter to the lender giving them permission to talk with those specific interested parties about your loan. The letter should include the following:

Property Address

Loan Reference Number

Your Name

Date

Your Agent’s Name & Contact Information (Real Estate Agent and/or Title Company)

Preliminary Settlement Statement (Provided by a title company).

 

Hardship Letter

This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment.

Proof of Income and Assets

Lenders will want to balances of savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or assets of tangible value.

Copies of Bank Statements

Typically Lenders require a 3 month review of all bank accounts.

Listing Agreement and MLS Printout Sheet

Your real estate agent can provide this to you.

Purchase Agreement (Sales Contract)

When you reach an agreement to sell, the lender will want a copy of the offer. The lender may renegotiate terms of contract, such as commissions, fees, and refuse to pay for items such as home warranties and home and termite inspections.

ITEMS YOU SHOULD BE PREPARED TO GIVE THE LENDER:

·         LETTER OF AUTHORIZATION (we will provide this to you)

·         LISTING AGREEMENT

·         MLS PRINTOUT

·         PURCHASE CONTRACT

·         HARDSHIP LETTER (we can provide examples for you to follow)

·         BANK STATEMENTS (3 MONTHS)

·         2 YEARS TAX RETURNS

·         PAYSTUBS (3 MONTHS)

·         ESTIMATED SELLER PRELIM HUD (we provide this for you)

·         BUYER PRE-APPROVAL LETTER (WITHIN 60 DAYS) OR PROOF OF FUNDS (if cash offer)

·         FINANCIAL STATEMENT

Each lender typically has their own documents and forms required for short sale. Contact our office- we know what each individual lender requires.

***SOME LENDERS REQUIRE THAT THE HOME BE LISTED ON THE MLS. THIS REQUIRES YOU USE A REAL ESTATE AGENT. CONTACT OUR OFFICE TODAY AND WE WILL SEND ONE OF OUR QUALIFIED SHORT SALE SPECIALIST IN YOUR AREA TO HELP YOU***

 

We encourage you to consult an attorney and tax professional in regards to the possibility of a deficiency judgment or possible tax obligations. Some lenders pursue deficiency judgments after closings, and can issue you a 1099 based on the amount of the loan that was forgiven. It is important you understand all aspects of a short sale before moving forward.

 

 

 

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