Understanding the Process of a Short Sale
A short sale is the process of selling your home under instances in which the proceeds of the sale may not fully settle the outstanding loan balance. The lender accepts a payoff that is discounted to fully settle the loan. The advantage is that the lender meets all the costs that come with the sale. Such costs include repair costs, escrows and titles fees, and commission just to name a few. You can avoid foreclosure by getting assistance to dispose your home and payoff your current mortgage.
One thing you could be asking yourself is whether a short sale is right for you. This process is a perfect solution for anyone who has an overwhelming mortgage. However, you always have to go for a short sale that is approved by your lender. We work hand in hand with your mortgage company to ensure that you avoid foreclosure damages at no cost.
There is a difference between buying a property on short sale and buying a property that is owned by the bank or disclosure. However, you need to understand how to find the best deal. Short sales may have negative impacts on your credit score but you can request the bank to report the debt as fully settled. If you are hunting for a house, you should keep your eyes wide open for some of the best deals in the market.
The Process of Short Sales
Several individuals still view the short sale process as a mystery despite the fact that it has been in existence for several years. However, there is no need to worry if you don’t have a clear understanding on how the short sale process works. The truth of the matter is that we have several listed short sale agents who don’t understand the process.
I have also come across several confused short sale agents and puzzled buyers who are seeking for direction. It is sad to realize that even those individuals who operate in the real estate industry can’t explain the short sale process.
Banks offer short sales when the proceeds of the sale cannot meet the cost of the sale and payoff the loan or when the seller is facing a hardship. Such hardship may include reduced income or unemployment, divorce, death, bankruptcy, job transfer out of time, and medical emergency just to name a few.
As the seller, you have to prepare and submit your financial package to your short sale bank. The basic procedure is similar across all banks even though each bank has its own guidelines. The short package of the sellers should have the following components.
- Letter of authorization that allows your agent to speak to the bank
- RMA or completed financial statement
- Preliminary closing statement
- 2 years tax returns
- Hardship letter for the seller
- 30 days of payroll stubs
- Bank statements for the last 2 months
- List of comparable recent sales or a comparative market analysis
- 2 years of W-2s
The First Step
The first step in the process is to write a short sale letter and submit it to your bank. An agent should provide the potential buyer with a list of comparable sales. No bank is in the business of releasing mortgages at a throw away price. The bank will always strive to get something close to market price of the asset.
Most banks start the short sale process after receiving an accepted purchase offer. However, the bank may commence the short sale process prior to the offer. Once the seller has accepted the offer, there are some documents that the listing agent has to send to the bank. These include the executive purchase order, short sale package of the seller, listing agreement, preapproval letter from the buyer, and proof of funds and copy of earnest money. The package should be complete to avoid any delays in the process.
Once the short sale process is at the bank, the listing agent should conduct it at regular basis to avoid any delays. The bank should acknowledge receipt of the file, sign a negotiator, order a BPO, sign a second negotiator, send the file for a review on the basis of PSA, request all parties to sign an Affidavit, and issue a short sale approval letter. In case the short sale process takes a long time, the buyer may cancel it at any point.
How Short Sales in Real Estates Apply in Your Situation
Short sales in real estate occurs when the loan balance of your mortgage against your property are higher than the sale value of your property. Short sales have different effects whether you are dealing with a real estate investor, seller or buyer.
In case you are looking for a reliable listing company, we are well placed to offer you such services. We will facilitate this process whether you want to sell your property or if you are looking for a real estate to buy. We offer the best solutions within the region when it comes to short sale facilitation.