Understanding Short Sales

In my continuing series dealing with real estate tips for home sellers, I would like to focus on the dilemma facing many homeowners with delinquencies in their mortgage payments. While this topic used to be laden with stigma, it is now becoming quite commonplace and homeowners are looking towards short sales as an alternative to foreclosure. Navigating the waters of the short sale can be a daunting task for many first time and even experienced sellers. The concept of short sales is often viewed as a lifeboat for many borrowers who may under other circumstances face the possibility of home foreclosure. In a nutshell, the short sale process involves marketing and selling the property for less than what is owed on the existing mortgage by agreement with the lender. In a scenario where a borrower gets behind with their payments and cannot come up with the the funds to become current, some lenders will allow a short sale in order to prevent the home from going into foreclosure.
Generally, though not always, the homes are sold below the appraised value and proceeds are used to satisfy a percentage of the amount owed by the borrower. Receiving approval to offer a home as a short sale requires a borrower undergo a financial audit and procure a qualified buyer to purchase the property once bank approval is granted. Borrowers are typically assigned a loss mitigator. This person is usually a bank employee and their goal is to develop a strategy to help borrowers become current with payments, or establish a short sale approval within a specific period of time as a means of avoiding foreclosure proceedings.
All lenders have variances in the kind of short sale programs offered and unfortunately, there is no one-size-fits-all approach for negotiating with lenders to obtain short sale approval. Generally speaking, borrowers who have equity in their property or those have other assets which could be used to repay the note are not able to qualify for short sale programs. The best way for one to be certain is to contact their lender early in the process of mortgage delinquency as each financial institution will have variations in their procedure.
Preliminary steps in the short sale process involve submitting a series of financial documents to the lender. The loss mitigation specialist will carefully examine a borrowers’ financial status to determine if they are financially insolvent or possess equity/assets which could be used to repay the loan. The kinds of documentation borrowers are asked to submit include payroll documentation, previous years’ tax returns, a list of other static monthly expenses, property tax bills and homeowners’ insurance premiums, credit card and banking statements, and various other documents.
Most banks will require borrowers to have a buyer in place before discussing the option of short selling property. If so, a copy of the purchase contract will be required by the lender. Sometimes banks will allow borrowers time to list their property through a realtor and allow a specific period of time to locate a a ready, willing and able purchaser. In those cases a borrower will need to submit a copy of the listing agreement to the bank. If a buyer cannot be located and placed under contract by the deadline, lenders may opt to begin foreclosure proceedings.
If you are facing foreclosure and need to sell your house quickly to satisfy a short sale agreement, you may want to consider seeking a Realtor who works with private real estate investors. Private investors often seek out distressed properties as they are prime candidates for a fix up and resale process known as flipping..Private investors often purchase properties with cash, as opposed to traditional financing, in order to speed up the transaction. Finding the right investor who has readily available cash reserves can vastly increase the borrowers chance of approval for the short sale and keep the property out of foreclosure.
Borrowers should spend time and research the process of short selling their home and examine the pluses and minuses of this decision. A good place to start this research is by contacting a qualified and knowledgeable Realtor. Coldwell Banker Encinitas Realtor Linda Moore has been working with homeowners who are facing difficult times and want the expertise of a local agent skilled in the process of short sales. Her ability to tap into the local investment community has helped many sellers successfully navigate their home sale by employing creative short sale strategies that yield results.

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