What is a Short Sale?
Short Sale: (Also called "Short Pay" or "Pay Off") A process in which a lender agrees to receive a lower amount of an owed debt in exchange for the sale of the property to a third party. For example: If a homeowner facing foreclosure, has an existing first mortgage of $300,000. An offer of $250,000 is acceptable as full payment for the loan. This is a ‘short sale’.
Why are they willing to take such a loss?
Several reasons; first of all, banks do not like excess inventory and delinquent loans on their books. An opportunity to sell the property is very attractive. Secondly, lenders know they could lose a substantially larger amount of money if the property goes to foreclosure/trust deed sale. There are many fees and expenses involved: i.e., property taxes, liens, repairs, etc. They’re better off taking the minimal loss beforehand and be finished with the headache and liability if in fact it goes to a ‘trust deed sale’.
They are opting for the lesser of two evils. Basically, the same thing you are doing.
What does a Short Sale cost?
A short sale transaction requires a substantial amount of work. Unfortunately, due to the amount of time and effort that is put into the transaction, a minimal service fee is sometimes required. Make sure, that the fee is totally refundable upon the closing of the sale. Short sale brokers and agents that specialize in this niche are mostly compensated by your lender as part of the negotiation and sale process. Keep in mind, when conducting a short sale, it is imperative that no payments are applied to the note(s). Remember, you are demonstrating hardship and you must be delinquent in payments to qualify. However, due to the extensive amount of time a short sale takes to facilitate, it will allow you to put money aside to make a fresh start. Regardless if the property is rented / leased, you are allowed to retain the proceeds during the transaction.
Be cautious with companies that try to charge excessive fees that are not willing to refund the service fee. In addition, when interviewing a short sale company, never, should you allow someone to modify the deed on your property when conducting a short sale.
What if my home already has an auction or sale date?
In most cases, if there is an auction or sale date we can convince the bank to postpone the action for at least 30 days and in some cases 60 days. Where you will run into difficulties, is when the date is just days away. It is imperative, when considering a short sale that you get the property listed for sale and try to start the process as soon as possible.
Why do a Short Sale?
Typically, when someone is at the point of not being able to afford their home, due to; high rates, dips in property values, divorce, loss of employment, decrease of income, health and medical issues, etc., then we are forced to make a life altering decision.
We will be the first to tell that a short sale is bad, but a foreclosure is worse. However, the time has come and you need to face the facts and do what's most beneficial for you and you family. Look at the big picture.
Most importantly, you have the ability to save your credit from reflecting a ‘foreclosure’ as to having a ‘settled debt’, a much more desirable rating. Any lender will tell you, having a foreclosure will prevent you from purchasing or refinancing real estate over the next seven to ten years.
What is required?
All banks will require several standard pieces of information:
· A letter of hardship
· Two years tax returns (if you have not filed, include in hardship letter)
· Two most recent paycheck stubs for each person on loan
· Two most recent bank statements
· Copy of mortgage statement(s)
· A signed borrowers authorization
*National Real Estate Solutions requires all items to be copies and sent in all at once
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