Short Sale Process

March 24th, 2008 |

Author: Benchmark Real Estate Group, Inc. - Torey Eisenman

What is a Short Sale?

A short sale is an alternative to foreclosure. If you are a homeowner and you can no longer afford to make your mortgage payment this may be the alternative for you. A short sale occurs when the lender agrees to accept a payment that is less than the mortgage balance. Not all lenders will accept short sales or discounted payoffs. You must be able to qualify for a lender to agree to a short sale on your property. Things you need to do if you are a distressed owner and would like your lender to consider a short sale on your property.

Items Lenders Typically Require to Consider a Short Sale

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 mitigation company, real estate agent, closing agent, title company or lawyer, the lender will cooperate with your representative by providing the with written permission to talk with those specific interested parties about your loan. The letter should include the following:

Date, OwnerName, Property Address, Loan Reference Number and Your Agents name and contact information

Preliminary HUD

This is an preliminary (estimated) closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions and mitigation fees, if any. The mitigation agent, closing agent or lawyer should be able to prepare this for you, if you do not know how to calculate any of these fees.

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. Lenders are not inhumane and can understand if you lost your job, were hospitalized or had a life altering event. This letter should describe in detail the events that have caused you to become delinquent with your mortgage payments.

Proof of Income and Assets

Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lenders require assurance that you cannot pay back any of the debt prior to accepting short sale terms. Bank StatementsThe lender is going to want to see several months worth of bank statements. They only want to accept short sales if the debtor is unable to pay the loan.

Comparative Market Analysis

A real estate agent can provide you with documentation that substantiates the price you need to sell your home for. The lenders want to understand recent sales in the area for homes that are comparable to yours.