Short Sale Information
For some clients, one way to relieve you from the situation is to give up the liability by doing a Short Sale. If after we qualify your financial situation and it is obvious that you can no longer afford the house, we can attempt a Loan Modification by working with our Loss Mitigation department. If the results of the proposal from the Loan Modification department doesn't fit your needs, you might want to consider a Short Sale.
Because of the real estate situation the market fluctuations and changes that are beyond your control, you might not be able to sell the house for equal or more than what you owe the bank. When this is the case, it is called a Short Sale because the selling price was short or less than the existing lien amount(s). The Short Sale basically allows you to sell your house to an independent 3rd party for less than what you owe.
Why a Short Sale
When a lender agrees to a discount on the mortgage, they avoid a possible foreclosure auction or bankruptcy. For example you are facing foreclosure and you have an existing mortgage of $400,000. We submit a letter offer to the lender for $320,000, which if accepted, is considered full payment for the loan. This is a Short Sale. You might be wondering why the lender would agree to do this: many reasons. The lender wants to avoid foreclosure because there are a lot of fees associated with the foreclosure auction and, therefor, they are willing to take the discounted amount to settle. Secondly, lenders don't need or want any excess inventory or bad loans on the books, so they sometimes see a Short Sale as an opportunity to get the house sold without a huge loss. The lender will use the proceeds from the sale to pay off the existing mortgage and the remaining balance will be negotiated or some cases, forgiven. This option is in place for the homeowner that is willing to part with their property and keep their credit rating with the least amount of negative reports.
Negotiating a Short Sale with the mortgage lender can be a difficult process, generally because it can be very hard to find the bank officer who has the authority to accept a discount. A similar experience is when you've had to get your phone bill corrected, the process involves a lot of waiting on hold and being bounced around a complex maze of automation and voice mail systems. If you are able to get in touch with the right person, then the hard work and the negotiating can begin.
To qualify, the mortgage company may require some or all of the following;
1. A written contract with you and buyer.
2. Proof of the sale, HUD-1 or settlement statement.
3. Pre-approval letter for the buyer.
4. Proof from a real estate agent that your house has been on the market for at least 90 days.
5. Income documentation from you showing that you can't afford the loan.
Like a regular loan file, a Short Sale can fall through for a number of reasons. Collectively, we have 100's of years of lending experience, we know what the lender needs for approval and in what order. This affords us the ability to do the file right the first time.
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