If you can not meet the expense of the mortgage payments on your property, a short sale may help you avoid declaring bankruptcy or prompting your lender to foreclose on your home. A short sale takes place when your home loan's lender discharges your property's lien and agrees to receive less money than you owe on the mortgage as a payoff. For example, if you owe $200,000 on your home, and you are offered $190,000, the lender may consent to $190,000 as full payment. Don't forget, however, that some banks will not agree to a short sale, particularly if foreclosure is the better option for them.
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What You Need to Learn About Short-Selling Your Home
Most lenders have particular requirements regarding exactly what documentation they need from those seeking a short sale, although the majority will require a letter of authorization, wherein you give them permission to release your personal information. Think about writing your lender a letter granting your permission to consult with others about your loan. Put in your full name, the date, the property address, your mortgage account number, and the name and number of the real estate agent with whom you're working.
Your closing agent or lawyer should additionally prepare for you a preliminary net sheet. This contains the estimated closing statement with the sale price for your home that you judge you will receive, all the normal costs of sale, the balance of the unpaid loan, your late payments and fees, and any commissions your real estate agent will receive. You will need to convey this to your lender as well. Send with it a hardship letter that explains exactly how you failed to keep up with your payments, a frank report of your income and assets, together with any savings accounts, stocks, additional properties, or articles of real value. Include copies of your bank statements, a comparative market analysis, if one is needed, and copies of your listing and purchase agreements when your home is put up for sale, and later when you are given an offer. Once your lender has all of your paperwork, they will determine whether or not to approve your short sale.
Understand Risks of Purchasing a Short Sale Home
While the enticement of getting a good deal on a short sale is quite strong, be sure to investigate the property before making an offer. To start with, a lender is under no obligation give a positive response to your offer on a short sale listing, even when the seller accepts it, merely because the property is listed with short-sale provisions. Bear in mind that a lender may have granted the short sale to the seller because the seller presently owes more money than the home is worth. This would not make the listing price under market value, but instead make the price of the home comparable to other properties up for sale. Do some public-records research in order to learn whether the home is in foreclosure, and learn how much the seller owes the lender. This will help you decide how much to offer. When a seller accepts your offer, send a copy of it to the lender for authorization and make your offer conditioned upon the lender's approval. Also, be sure you have the home inspected making your offer contingent upon an acceptable inspection.
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