According to Susan Santucci, Century 21 M&M Real Estate Agent in Oakdale, CA, “For home owners that can no longer afford to keep their mortgage payments current, a Short Sale is an option to consider in order to avoid bankruptcy or foreclosure.”
Essentially a Short Sale in real estate means the lender is accepting less than the total amount due. Unfortunately, not all lenders will accept Short Sales, and not all properties qualify for a Short Sale.
NOTE: For your protection, it is important that Short Sale candidates seek professional counsel; an attorney and/or an accountant.
One of the biggest obstacles in a Short Sale is a Second Mortgage holder. If there is more then one loan on the property, the secondary loans must be negotiated and resolved before the first Lender can agree to the Short Sale.
Susan Santucci further states that “if the home owner can qualify for a short sale and at the same time maintain all of their other financial obligations (credit cards, car loans, etc.), their credit may not be completely destroyed. The Short Sale will affect their credit for at least a period of three years as opposed to seven to ten years with a foreclosure or bankruptcy.”
If you are a seller in a Short Sale transaction there are steps you will need to take;
Find a Real Estate Agent well versed in Short Sale transactions and then get ready to personally submit the following:
A Letter of Authorization from the Seller authorizing the Lender permission to talk to the real estate agent handling your transaction.
A hardship letter. This is a statement of facts that describes your financial situation and makes a plea to the lender to accept less than full payment.
Proof of Income or Assets. This is a statement where you list all of your current income and all of your expenses. Lenders want to know if you have any savings accounts, money market accounts, stocks and bonds, cash or anything of tangible value.
Copies of Bank Statements. Initially you should copy all of your bank statements for the last three months, later on the lender may ask for more documentation.
The following documents that will need to be supplied by your real estate agent:
An estimated closing statement (HUD1)that shows the sales price you expect to receive and all costs of the sale, unpaid loan balances, outstanding payments due, real estate commissions, etc.
Purchase Agreement & Listing Agreement
In general, this type of transaction is just like any other real estate transaction. All of the factors that come into play in a standard real estate transaction are just as important in a Short Sale including, but not limited to; intelligent pricing, condition of property, marketing and the showing of the property.
This biggest difference in this type of transaction is the Sellers participation in the process. The Seller must provide the necessary financial documents required by the existing Lender in order to justify the necessity of the Short Sale. And it should be noted that a Short Sale transaction normally takes between four to six months to complete.
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