WHAT'S A SHORT SALE?

Although most U.S. families continue to benefit from homeownership, a small group of consumers in areas where home prices have declined are facing a difficult situation. These owners find themselves upside down, owning more on their mortgages than the present market value of the home. 

When this loss in value is combined with accelerating loan payments or unexpected changes in a home owner's financial situation such as job loss or medical expenses, some families may be faced with the possibility of foreclosure.

In most cases, short sales are the best option to help the home owner avoid foreclosure.

The challenge for sellers is finalizing the short sale quickly enough to prevent foreclosure. Short sales are very complicated transactions that require approvals from a number of parties including the loan servicer, the loan investor, and the mortgage insurance company if there is one. If there's a second mortgage on the property, it can take additional time to get both the first and second lien holders in agreement. Not to mention the additional complication resulting from additional liens on the home (HOA, IRS, Pool Builders are common).

Because of these complexities, it can be challenging to keep the process on track and moving forward. For that reason, many real estate practitioners avoid transactions involving short sales. But there are ways to expedite the short-sale transactions considerably. As much as three-quarters of the work needed to finalize the transaction can be completed before the first buyer's offer is received.

 

Steps to Keeping Short Sales Moving

 

When considering a short sale, all lenders require borrowers to provide an application package containing a signed and dated financial worksheet, a hardship letter explaining why the borrower is no longer able to pay the current mortgage, and a letter authorizing the short sale "negotiator" to work with the lender on behalf of the borrower. 

 

Banks also require that the home owner's list the property with a Realtor and provide a fully executed listing agreement as part of the short sale applicaton.  An incomplete or inaccurate application will create unnecessary processing delays, therefore it is critical that homeowner's understand the importance of completing the packet accurately and quickly.

 

In some cases, the purchase offer can create delays. If the buyer's offer doesn't reflect current market conditions and comes in under fair market value, it may not meet the investor requirements and be denied. If the offer requires too many concessions from the seller, a lender may also reject it.

 

It's important to note that in some circumstances, market conditions are changing quickly, so what constitutesd market value is no longer accurate.

Although short sales are seldom easy or stress-free, they are definitely  worth the effort for most customers. They help provide home sellers with a graceful exit strategy in an awkward situation.