First, lets discuss just what a short sale is: A situation where a home borrower can no longer afford to make the payments to their lender, and are in default on that mortgage. A short sale is an attempt to sell the home and have the lender accept a lesser amount for the property, that is owed.
Here are some helpful tips:
1] Do not try to attempt this type of negotiated sale yourself, you will need the services of an experienced Realtor who specializes in this type of sale. Check in detail their number of years working with short sales and obtain the number of successful closings they have completed in the last 12 month’s. Without a real estate professional, there is little chance of a success in the short sale market.
2] You will need a good “hardship” letter. This is absolutely critical! Without a stated reason why you can no longer make the mortgage payments, you need not proceed any farther in the short sale process. Good examples are…loss of your job…reduction in income due to wages being cut…divorce and loss of income…sudden medical issues & expenses…job relocation…etc. There needs to be some unavoidable cause beyond your control in order to give your Realtor the negotiating tools needed to convince the lender, its in the best interest of all parties to proceed to a short sale.
3] With step 1 & 2 completed it is now time to STOP making the payment on the mortgage. You will need to be 3 month’s behind in the mortgage before most lenders will even speak to your Realtor over the phone, about a possible short sale. Sounds bad, but in most of the cases I have seen, if your current on the note at the bank, no one will speak to your Realtor. During this period, you as the seller need to give your agent authorization to release your financial information…gather your bank records…tax returns for at least 2 years…draft your hardship letter…most recent pay stubs…your loan number and lender address where your payments are made…copy of the listing agreement. Get the home on the market, when you approach the 3 month payment lapse
4] Get a contract on the home. This may not sound terribly important at first thought, but its critical. The ball really starts rolling when your Realtor has a contract in hand to start the negotiation process, with the lender. Set the listed price on the home that will get you a contract quickly…….lingering on the market is never wise, when attempting a short sale. Now its time for the Realtor to run with the ball. With the contract in hand and a proof of funds letter from the buyer, they can take your documents and hardship letter and contact the bank. Be certain that your Realtor feels comfortable with the buyers patience level…….month’s can go by before a decision by the lender is made. If the buyer gets antsy and walks……the file will close and the process starts all over again.
5]Everything is negotiable in a short sale. The final sales price, Brokers compensation, terms of the accepted sale, and the lender will more than likely come back with their own addendum’s and a try for a deficiency note from you after closing, for a portion of the outstanding balance owed. Again, if you have selected your Realtor wisely, some of these types of issues can be overcome.
6] Maintain the home to the exact conditions is was when it went to contract. Sales are always AS IS, but if you let the home deteriorate, you may be giving the buyer a way to walk away. The other reason for this step is also buyer related. Once the Asset Manager decides to accept a contract and all terms have been met with the lender…….then is the time for the buyer to have the home inspection done. It is unreasonable to expect a potential buyer to shell out $350 – $500 to inspect a home that the lender has not fully approved yet. Keep the property in great shape.
Recently the trend has been for more short sales to take place now that the learning curve has been completed by the lenders. Many banks are up to speed and their files have been streamlined for the process to move faster. It took a while to convince lenders that they actually save large amounts of money by avoiding the foreclosure process……but once they saw the savings on their balance sheets, the door has swung open wider for this type of property liquidation.
Planning is key in the process. If you will keep these 6 tips in mind, it will be a much smoother process, with a successful outcome..