Short sale process in real estate - how to do a short sale - a foreclosure alternative
Short sale in real estate is nothing new and have benefits for both, the lender and you. While the short sale process seems pretty straightforward - home is sold for less than the mortgage you owe on it and lender forgives the remaining debt, there are few things to know on how to do a short sale, so it doesn't become too cumbersome and time-consuming for everyone involved. The savvy mortgage lender always looks at short sale process as a valid alternative to foreclosure, and is usually willing to accept a smaller pay-off or a deed-in-lieu of foreclosure to simply minimize its loss rather than go all the way the long and costly road of foreclosure. A furnished home being sold short through the homeowner, or an empty home in good marketable condition, is far more desirable to the general home-buying market than a foreclosed one. And the hit the lender takes on the short sale is rather small compared to the expense of foreclosing on the property.
Plus, non-performing loans chip away at bank reserves and they want them from the books. For you, the owner, main benefits are
- less damage to your credit history than in a foreclosure process
- no outstanding debt on the house
Now, many issues may arise. Your lender goal is to get as much money out of the short sale as possible to minimize its loss. The lender will hassle for every dollar, even asking the listing realtor to reduce commission. If there are junior lien holders, more negotiations may be needed on the amounts that satisfy them so they release their liens. You may very well have to show other resources that could reduce the remaining debt. Here is how to do a short sale, and we assume that you know for a fact that the only way to sell your house fast to escape foreclosure is to sell it short, below the mortgage you owe on it -
First, check with your lender loss mitigation department, if it is willing to consider a short sale, and how to initiate the process. If the answer is yes, ask what documentation you need to get an approval. Be prepared to furnish last 2 years tax returns, two months of latest pay stubs, and 6 months of recent bank statements, together with a short sale letter of explanation. Get your preliminary title report, preliminary settlement statement and written approval from all junior lien holders if there are any.
Second, get an experienced local real estate agent who has closed many short sales in the last 12 months and, highly preferably, has worked with your lender and its loss mitigation/prevention department. See if he or she can furnish some references from past short sales clients. Then, give the agent power of attorney enabling direct talk between your agent and your lender. Now, the most touchy subject is the price which should be high enough to satisfy your lender, yet sufficiently low to sell house quickly. Your real estate agent should work the price out with the lender.
Third, sell the house, and before you move on and forget about it, consult with your accountant - the Internal Revenue Service often considers short sales as a relief of debt and may treat it as your income.
Sat Feb 7, 2009 01:02AM | Copyright: www.bad-credit-advisor.com | More in Mortgage | Comments (0)
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