How a Short Sale Works

A short sale occurs when the borrower owes more on their mortgage than the current market value of their property if they were to sell the property in today’s market place. Normally, short sales are options for buyers who are in default and are trying to avoid their lender foreclosing on their home.  The lender must approve the sale because the proceeds of the sale will not be enough to pay off the loan balance, and the lender must write off the remaining balance on their books. The seller is then free to walk away, and the new buyer gets clear title to the home.

How do you know if you qualify for a short sale?

In order to qualify for a short sale you must meet the following qualifications:

1.  Show financial hardship why you can no longer make your mortgage payments.  Usually, the lender will want to see a hardship letter and proof of loss of income such as the last two paycheck stubs, recent bank statements,  last two year’s W-2 statements or 1099’s and two year’s tax returns.

2.  Substantiate that property values in your neighborhood have declined, and that you are only able to sell your home for current market value, which is less than your loan balance. This can be accomplished by having a local Realtor prepare a comparative market analysis of similar homes in your area that are listed, under contract and recently sold for the last six months period.

3.  You are currently at least three months behind in your monthly loan payments, or you can show that you are about to go into default.

How long does it take to complete the short sale process?

There is no guarantee that your lender will approve the offer once you secure a buyer. The process normally takes at least 90 days because the lenders are so backed up with paperwork and short staffed. The following are the steps involved in the short sale process:

Contact lender’s short sale or loss mitigation department and submit the short sale package, including all the items listed in paragraph 1 above, together with a copy of the purchase and sale  After you have contacted the lender’s short sale department or loss mitigation department, submitted your short sale package which includes the items listed above in  paragraph 1 above,  the purchase and sale contract and any brokerage listing agreements, you need to follow up on a weekly basis with the lender to make sure they received the package and that they are working on assigning an negotiator to your file.

Once a negotiator has been assigned, you will get a response within 45 days. The buyer may need to counter back and forth a couple times, as generally the lender does not accept the offer immediately.

Advantages/Disadvantages of Short Sales

The advantages of a short sale to all parties out way the disadvantages.

Advantages:

• Seller does not lose their property to foreclosure and saves their credit.
• Seller walks away not owing anything to the lender.
• Buyer gets a discounted property.
• Realtors get their commission paid by the lender.
• Lender saves time and money avoiding the foreclosure
  process.

Disadvantages

• Time element.
• Buyers can get discouraged and walk away.
• No guarantee that lender will approve the short sale, and they may foreclose on the property.

---

• If you are in the process of Foreclosure or may be facing Foreclosing soon and need professional legal assistance, Submit your Case for a Free Review from a Foreclosure Attorney in your area to be aware of your options.