Let’s see if the following scenario sounds familiar. Keep in mind everyone who finds themselves in a situation similar to the one I am about to describe has their own unique story, but there typically are several common factors overall.
The current economic downturn has hit home for you in a very personal way. Your finances are not in good shape. You’re having a hard time paying the mortgage on the house, and you are sure that in time the lender will start foreclosure proceedings against you, or maybe they already have. You want to avoid that, but don’t know how. A short sale may be able to help you avoid foreclosure. Do you have an idea what a short sale is? Do you know anyone who has gone through the short sale process?
I would like to define the term short sale, so you can make an informed decision on whether to attempt a short sale or not. First, let’s discuss your current situation. This is the common process many homeowners went through before they decided that a short sale was in their best interest.
How you got to where you are now
You had to take a loan from a lending institution and your house was used to secure the loan. The loan is most likely for the house you are living in right now, or possibly an investment property. You are going through financial hardships, and you have been unable to pay the monthly payment for the loan. You are also more than 60 days behind in payments. You are aware that the value of your property is less than the amount you owe the lender. The lender has been sending collection notices and could initiate foreclosure proceedings against you, or possibly they already have. You want to avoid a foreclosure. And honestly, your lender wants to avoid foreclosure too, but if they allow too much time to pass your interest in arrears and penalties will increase, and the lenders loss due to your non-payment will also increase. You and the lender are in a situation where both of you are losing.
A short sale benefits you and the lender
A short sale allows you and the lender to reduce your losses. Keep this in mind because it is the most important reason for you and your lender to move forward with a short sale. A Short Sale gives you a little more control over the situation. In a Short Sale, you are the one who initiates the process to begin with. In a foreclosure, it is the lender who takes action. In most cases, the lender would prefer to avoid initiating a foreclosure. Why? Because a foreclosure process is lengthy and costly for the lender, and the lender does not receive any payments from you, only the deed to your house. Your lender is not in the business of owning real estate, nor do they want to be. One important detail to keep in mind; after a foreclosure, you will not be able to get a Fannie Mae loan to buy a home for 5 years, even if your financial situation has improved. After a short sale, you can potentially buy a house after 2 years, assuming you do not continue to have other bad marks on your credit. The cost to the lender is less, and typically they will receive a much larger portion of the original loan amount back in a short sale transaction than they would in a foreclosure action. You are also able to avoid foreclosure, something too many financially challenged homeowners have not been able to do.
How to start the short sale process
This course of action begins when you, the borrower, decide that a short sale is the best option. You start the process by contacting a local Real Estate Agent to assist you by listing the property for sale on the Multiple Listing Service (MLS). Immediately, your real estate agent will contact your lender on your behalf to make them aware of your situation and the need for a short sale. This is done so that the agent can get the list of all the necessary documents your lender will require and also to find out what steps that your lender requires you to follow in order to begin the short sale process. Having a professional real estate agent who is experienced in the short sale process assisting you with this process is imperative. This will allow you to maximize your time with other pressing concerns. The Short Sale Specialist real estate agent will represent you in negotiating the short sale with your lender and getting it approved, as well as representing you as the listing agent in the real estate transaction. From listing the property to get it on the market, to the point of closing, and everything in between a good Short Sale Specialist real estate agent will handle the entire transaction and coach you through the process. Your real estate agent will do a market analysis to determine the current market value of your home. Once the proper value is determined the property will be listed at a price it will sell for in today’s current market, regardless of the amount you owe on the mortgage. Once a Buyer is found for your property, their offer along with all of the required documentation will be submitted to your lender, and your Real estate agent will begin the negotiation process with your lender. The objective is for your lender to settle your account for the amount they will receive from the proceeds of the transaction. All of the transaction costs you would normally pay as a Seller will be paid out of the proceeds of the sale, including your real estate agent’s commissions.
Now, please bear in mind that in a short sale, you will not receive any payment from the buyer of your house because all of the proceeds will be paid to the bank to settle the account for your loan, as that amount will be less than the total amount you owe the lender. Hence, the term Short sale or Short Pay. The short sale process is initiated to reduce the loss to the primary parties involved, you and your lender(s).
If you have questions feel free to call me at 303-503-6980 or email me at email@example.com .