For homeowners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or foreclosure proceedings. One of those options is called a short sale. When a lender agrees to do a short sale, it means the lender is accepting less than the total amount due. Not all lenders will accept short sales, especially if it would make more financial sense to foreclose.
Although all lenders have varying requirements and may demand that the homeowner submit a wide array of documentation. The following steps will give you a good idea of what to expect.
Call the lender: You may need to make numerous phone calls before you find the representative responsible for handling the short sale, ” Patience is a virtue”. At this stage you do not want to talk to the short sale or work-out department. You want the supervisors name, the individual that has authority to make a decision.
Submit a Letter of Authorization: Lenders will not disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, you will receive better cooperation if you write a letter to the lender giving the lender permission to discuss the process with your agent.
Preliminary Net Sheet: This is an estimated closing statement that shows the bank all cost associated with the short sale. The HUD1 or net sheet can be prepared by a local Title Company. This statement would include any unpaid loan balances, late fees including real estate commissions. The bank will pay all commissions. If the bottom line shows cash to the seller, you will not need a short sale.
Hardship Letter: The sadder, the better. This statement of facts shows how you got into this financial bind and makes a plea to the lender to accept less than full payment. Honesty is the best policy, lenders are not inhumane and can understand if you lost your job, were hospitalized or an untimely death of a spouse. Lenders are not empathetic to situations involving dishonesty or criminal behavior.
Proof of Income & Assets: Lenders will want to know your financial situation including savings and bank statements, money market accounts, stocks, any real estate holdings or anything of tangible value. Lenders require assurances that the owner can not pay back any of the debt that is owed.
Comparable Market Analysis ( CMA): Occasionally markets decline and property values fall. If this is part of the reason you can not sell your home and pay off your debt to the lender, this can be substantiated for the lender through a CMA. Your real estate agent can prepare this estimate of value, which will show prices of similar homes.
Purchase Agreement & Listing Agreement: When you reach an agreement to sell your property with a prospective purchaser, the lender will want a copy of the offer, your listing agreement and the HUD1. Be prepared for the lender to negotiate or refuse to pay for certain items, such as home protection plans or termite inspections. If everything goes well, the lender will approve your Short Sale. I hope this helps define the short sale process.
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