What To Do Before You Attempt A Short Sale
Before attempting a short sale
understand many mortgage lenders today are willing to work with homeowners who fall behind on payments, offering them opportunities to repay the outstanding amount in a varient of wasy – a revised payment plan, loan modification, refinancing, etc. It is oftern less expensive for a lender to help you keep you home than to go through foreclosure
Preparing For Foreclosure:
Understand that foreclosing is an expensive, time-consuming process for lenders, costing them an average $50,000 per property, according to a report by the Joint Economic Committee of Congress. In a foreclosure, the lender tries to sell the property at auction – which may also result in lower net proceeds than the outstanding mortgage amount.
If the property does not sell at auction, the lender repossesses the property and puts it on the market for sale as lender-owned real estate. At this stage, the home has become a non-performing asset for the lender, impairing the lender’s ability to make loans. The fact is, lenders want your money not your home. That’s why your lender may be willing to offer you a workout plan so you can keep your home.
Examples of Qualifying Hardships
The more temporary your repayment problem is likely to be, the better the chance you can work something out with your lender. A sampling of hardships that may qualify for short sale lender approval include:
In addition, you may qualify for the government-sponsored Making Home Affordable Program.
The important point is to contact your lender’s loss mitigation department early and explain your situation – before the lender initiates foreclosure. Doing so will help you minimize damage to your credit and avoid incurring late fees and legal charges on top of your unpaid debt.
Here’s Where Our Expertise Comes In
In the event you cannot find a way to keep your home, conducting a lender-approved short sale may be your best alternative to foreclosure. If so, ask your lender what requirements must be met to win approval for a short sale. Most lenders’ loss mitigation departments have a short-sale package of materials explaining the process, requirements and documents needed from you.
From this point forward, you’ll need to work with an experienced, knowledgeable real estate professional to help you navigate the complicated process of winning lender approval for a short sale.
9 Steps To Conduct A Lender-Approved Short Sale
If you are unable to avoid foreclosure any other way — loan modification, refinancing, etc. — getting your lender’s approval for a short sale may be your best option. The process, however, is complex and varies somewhat depending on the lender’s requirements and the seller’s specific situation. Here are the basic steps you will need to go through. When you hire us (Step 3), we will guide you to prepare all the documents your lender requires and follow-up directly with the lender.
9 Steps Of Every Short Sale
Complications of Lender-Approved Short Sales
Many lenders will not agree to short sales in advance —
sellers must have a purchase offer in hand before asking for lender approval. As short sale specialists we know the only thing that will stop many lenders from letting the foreclosure train leave the station is a buyer’s valid offer.
The buyer must have the patience to wait —
perhaps weeks or months, for your lender to approve the short sale. It takes a very motivated buyer to enter into such a transaction knowing that the deal could ultimately fall through.
Many short-sale purchase offers come with numerous contingencies designed to protect the buyer.
For example, the buyer’s inspection contingency may be written so as to allow the buyer to back out of the deal if anything negative appears in the inspection report. (This is another reason to put your home in the best condition possible before listing it for sale.)
Securing your lender’s approval can be a long process.
In fact, if your loan has been assigned to a servicer — who handles your loan for the investor who owns it — much of the negotiations will occur with the servicer’s representative. Only when the servicer is satisfied with the short sale will it be placed before the investor for approval.
If you have more than one loan secured by your home —
you will have to either pay off those other loans or negotiate with those lenders to release their liens on your home so the short sale can proceed. It may be necessary for you to hire a reputable company or an attorney to negotiate with lien holders on your behalf.
Still, lenders approve short sales every day. The best path to success is working with a real estate professional that thoroughly understands the process and can guide you through it. That’s why our services are particularly valuable. We’ll help you price your home appropriately, find a committed buyer for your short sale, negotiate with your lender’s representative and keep the short-sale process on track through closing/settlement.
Working together we’ll get your home sold as quickly as possible.
Although there are exceptions, lenders generally do not “pre-approve” borrowers to conduct a short sale. Instead, you (the seller) find a buyer who makes a purchase offer. With our help as your real estate agent, you negotiate a sales contract with the buyer. We will present the contract as part of a short-sale package for your lender’s consideration. In many cases, your lender will then communicate with you and with your us, because we represent your interests in the short-sale transaction, about the disposition of your short sale.
What we do to win short-sale approval from your lender.
1. Finding the right buyer.
A critical element to the success of your short sale is finding a buyer who has the patience to go through the process.
Bear in mind, a short sale can take weeks — even months — longer to accomplish than a traditional home sale. In addition, it’s not uncommon for attempts to secure lender approval on a short-sale fail for one reason or another — the seller failed to prove a hardship situation, other parties with claims on the property could not be satisfied, the seller’s lender didn’t like the contract with the buyer, etc., etc.
We employ all our professional skills, knowledge and networks not only to find a buyer who is willing and able to purchase your property, but to negotiate a sales contract with the buyer that is likely to win your lender’s approval for a short sale. (For example, some lenders will not accept a buyer’s offer if the sale price is not less than 90% of market value or nets 85% after all closing costs are deducted.) Just as important, we educate your buyer and his or her real estate agent about the short-sale process, keeping them interested and informed as the process moves forward.
2. Presenting your short-sale package with a proposal to your lender.
Does a short-sale request have to be presented by a real estate agent? Perhaps not in every case, but lenders much prefer to work with professional real estate agents on short-sale transactions. In fact, if you hope to get the attention and cooperation of your lender, it is essential you work with a real estate agent who has experience working with short sales, who knows all the ins and outs of working with lenders and who is committed to your short-sale success. That’s where our expertise is invaluable to our sellers.
A short-sale package typically contains these documents, among others: authorization letter to negotiate on your behalf, signed sales contract, broker price opinion(s), preliminary HUD-1 settlement sheet, hardship letter, 2 months of bank statements (W2, 1099, tax return, etc.), budget worksheet, photos of home (interior, exterior), repair estimates, latest comparables, local market statistics, and other documents relating to current market value of your home.
We have the knowledge and experience to determine upfront whether your situation would likely qualify you for a lender-approved short sale. We understand what lenders are looking for in a short-sale request, and we make sure our clients provide all the information and documentation needed to start the process efficiently and effectively.
3. Staying on top of the process from start to finish.
The fact is lenders are currently swamped with requests for loan workouts and short-sale proposals. Many lenders are understaffed and/or operating with newly trained personnel who each may be expected to handle hundreds of cases at a time. In this environment, even a small oversight or glitch in the process could cause your short-sale request to end up in the reject pile or on the back burner.