What Is a Short Sale?

In this market with people not being able to get what they owe out of their homes; their ability not to be able to pay for their second home; not being able to pay for their rental investment home(s); due to job loss needing to downsize their present home; due to divorce needing to sell a home and not being able to sell their home for what they owe on it; or just having too much debt on their past healthcare issues, you do have an option for sale and selling quickly. You can look a list of things to do to get your home sold via "Short Sale".

A "Short Sale" is a negotiated process with your bank(s) about your mortgage terms to allow you to sell it for less than what you owe for it with their approval. The bank would rather get a partial payoff rather than the home going into foreclosure and them settling for a lot less. The foreclosure process averages about fifteen to twenty thousand dollars to the bank for every home they have. After paying lawyers, advertisements, and all the assorted fees, it all adds up, per bank, per house. Even if you have a first and second mortgage or even an equity line on top of that, you can do a short sale.   

This is not for everyone. You will still take a hit on your credit, but nothing like a deed in lieu of foreclosure, foreclosure or bankruptcy. Depending on when you are reading this article, the terms are now constantly changing with the political and mortgage scenes, which are very volatile these days. Consult with your local REALTOR® or mortgage broker for the latest information on the latest market trends and the affect it will have on your credit.

The first step, when you think this may what you want to do, is contact and interview a REALTOR®. Decide on one of them to represent you because you will have to have your home listed with a real estate broker before you can start this process with the bank. Not all agents have experience in doing a short sale; many do not have a clue about this. Make sure you hire a REALTOR® that has actually actually has a track record of doing these sales and knows the process well. Experience and contacts with the banks, foreclosure attorneys and the process are invaluable when doing a "Short Sale". This is a long lengthy process and you will need to have plenty of patience.

The first step once you are listed is to contact the bank(s) who have your mortgages tell them you have your home for sale and your situation about the sale value and what you owe. Then tell them about your hardship and request a forbearance or mortgage adjustment to your monthly payment. You objective will be to reduce your payment, even if it is just a few hundred dollars a month. The bank will attach what you are not paying to the tail end of your loan. They usually do this for six months to a year, depending on the bank, or they simply don’t have to do this at all. Some banks willjust accept the fact you are doing a "Short Sale" and work with the process. Either way you can do a short sale.

The bank is going to want a financial report from you, similar to what you gave your mortgage broker or banker when you bought your home. This will include things such as a copy of your last year’s tax return, last months bank statement, recent pay stubs, etc. They also will want what is called a “Hardship Letter”. This is a letter stating why you cannot continue to pay your mortgage under your present circumstances and the reasons you need to sell your home. You will also have to produce a “Letter of Authorization” so your agent can talk to the bank on your behalf during this whole process.

This is just to start the process. Once this is collected and given to the bank, the next step is to let the selling process work. With your reduced home price and the marketing of your REALTOR®, you should start seeing some showings and then some offers on your property eventually. Working with your agent and your timeframe that the two of you have developed in your selling plan, you can adjust the price to get attention in the market. This also depends on your area market trends.

Once you get an offer is when your agent and the bank start to really get involved. The initial process is that the offer is given to processor who will put together a workable file. They will order a BPO or an appraisal. This process will take about a week to ten days. After the appraisal the bank will compare the offer to what the value is and what is going to be their cost in this process. This is a bank and this is all about the numbers they need. If approved by that manager it will go to their negotiator and then go to the PMI company and the investors for final approval. This can take up to a couple of weeks. Again, this depends on the bank; some are going to do this quickly and some will be very slow. Have patience, you will need it at this time.

After approval or if the bank offers a counteroffer to the buyer is where the process is basically normal. Once there is an acceptable offer by all parties involved, they will issue an approval letter, and the closing is set and the process will conclude.

Once again, this is a process and your agent’s experience in doing these is a necessity. The contacts at each bank, the due diligence of your agent is important and the negotiation experience makes a big difference in this process. It is also important that your agent uses the correct paperwork to protect you, the buyer, and the agents involved to amke sure there are no judgments, liens or legal ramifications that will come back to you, buyer or seller. We have contracts that protect everyone and make this a smooth transition and sale.

Be careful of scam artist that say they will buy your home, or that they have a group of investors that will buy your home. These are scam schemes and can get you in trouble. You also need to watch for people callg you trying to do "Loan Modification". These can also be scams. Work with a professional REALTOR®, to help solve your problems. I mention again, get one that has the experience with working with "Short Sales".