is a Short Sale??? Information for Buyers and Sellers.
There are many ways to lose a home but
signing away ownership in a manner that destroys credit and strips an
owner of dignity is one of the hardest. For owners 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
When lenders agree 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; moreover, not all sellers nor all properties qualify for a short
Although all lenders have varying
requirements and may demand that a borrower submit a wide array of
documentation, the following steps will give you a pretty good idea of what to
- Call the Lender
You may need to make a half dozen phone calls before you find the person
responsible for handling short sales.
- Authorization and Release Sheet
Lenders typically do not want to disclose any of your personal information
without written authorization to do so. If you are working with a real
estate agent, closing agent, title company or lawyer, you will receive
better cooperation if you give this form to the lender giving the
lender permission to talk with those specific interested parties about your
loan. I have this form when you need it.
- Preliminary Net Sheet
This is an 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, if any. If
you do not know how to calculate any of these fees I can help you with
this. IIf the bottom line shows cash to the seller, you will probably
not need a short sale.
- 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.
Make sure to provide any supporting documentation.
- 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. You will need to provide two years tax
returns, four pay stubs, a financial statement (usually provided by them)
and a copy of your mortgage payments to all lenders.
- Copies of Bank Statements
If your bank statements reflect unaccountable deposits, large cash
withdrawals or an unusual number of checks, it's probably a good idea to
explain each of those line items to the lender. In addition, the lender
might want you to account for each and every deposit so it can determine
whether deposits will continue.
- Comparative Market Analysis
Sometimes markets decline and property values fall. If this is part of the
reason that you cannot sell your home for enough to pay off the lender, this
fact should be substantiated for the lender through a comparative market
analysis (CMA). I can prepare a CMA for you, which will show prices of
- Active on the market
- Pending sales
- Solds from the past six
- Purchase Agreement &
When you reach an agreement to sell with a prospective purchaser, the lender
will want a copy of the offer, along with a copy of your listing
It is a long process so try to be
patient and do the best you can to get the banks the information they request as
quickly as possible. Now, if everything goes well, the lender will approve your
21 Associates Realty is not associated with the government, and our service
is not approved by the government or your lender. Even if you accept this offer
and use our service, your lender may not agree to change your loan. If you stop
paying your mortgage, you could lose your home and damage your credit rating.
Back to top
Buyers pursue short sales to get a
good deal. So when you see a price listed for a home that you think is too low
for the neighborhood, before you jump on that price like hot fudge on a
sundae, you may want to find out if the home is a short sale.
You should make sure you understand
what could come up if you make an offer on a pre-foreclosure, short sale home.
It's not simple and be aware that very few can close in 30-60 days.
A short sale means the seller's
lender is accepting a discounted payoff to release an existing mortgage. Just
because a property is listed with short sale terms does not mean the lender
will accept your offer, even if the seller accepts it.
Make your offer contingent upon
the lender's acceptance. Give the lender a time frame in which to respond,
possibly up to one week, after which, you will be free to cancel. If the
lender is under no pressure to make a decision, the paperwork will sit on
In addition, the lender will
want to see that you have your own loan available and you are pre-approved.
You will need a pre-approval letter to submit with an offer.
Generally, the lender will not pay
for customary items that a seller would pay. These include home protection
plans for the buyer, buyer credits of any kind and pest / termite
inspections. A buyer will be asked to purchase the property "as
is," which means no repairs. You still have the right to do a home
inspection but it may be at your expense to have water turned on,
de-winterize and re-winterize a property, have utilities turned on and
possibly even pay for repair/replace smoke detectors and carbon monoxide
detectors for certification.
If you do have a home
inspection remember that you may not be able to negotiate like you would
with an average seller. The seller usually doesn't have the
funds available to do repairs and the banks do not usually give credits.
Once the seller has accepted your
offer, you will go to purchase and sale and that will be sent to the
lender for approval. You do not have a deal until the lender accepts.
Also, the lender will receive a copy of your earnest money deposit. Do
not be astonished if the lender asks you to increase it.
Short sale approval is normally a
long process taking anywhere from 30 days to over 4 months. Sometimes
the property is foreclosed before a short sale decision is reached.
You may want to find out if there is more than one bank involved as well
because if there are two banks you will need both banks to approve the short
sale before it could close.
I hope this information is
helpful. If you do decide to put an offer on a short sale property I
hope that it goes well and you are able to get a great buy! Please feel to
contact me if you have any questions!
Back to top