Some Information About the Short Sale
If you are facing a foreclosure, there are a number of means that could be used as a way out with the mutual consent of your lender (s), of which “short sale” is the most commonly used and applied by most of the property owners.
Definition of a “Short Sale”
The phrase “short sale” is a commonly used phrase in real estate. It actually refers to the net consideration (Price) that a property owner gets for his or her property. The net price of the property is the net figure obtained by deducting the selling commissions and other closing costs from the gross value of the property which is usually less than the amount mortgaged on the property.
Significance of a “Short Sale”
A short sale is a perfect substitute for a foreclosure as it gives the property owner a luxury of not going through the complex process of a foreclosure. Although a short sale does leave a negative impact on the credit report of the property owner but still this small negative impact is far better than the extravagant negativity that a foreclosure leaves on the credit report of the property owner.
Limitations of a “Short Sale”
The biggest limitation of a short sale is that it takes away from the lender (s) their right on the property together with the money owed to them. That is why it is essential that a short sale must be made by the property owner with the mutual consent of the lender (s). Lenders are institutions and it is their normal course of business in a declining market to deal with loads of requests for short sale from their customers to whom they have given money on mortgage which makes it a great limitation on short sale as it slows down the processing of a short sale request by the lending institutions. Realtors are the persons who process the requests for short sale and it normally takes a few weeks for the Realtors to process a request and then forward it to the loss mitigation department of the lending institution. Once the request reaches the right person in the loss mitigation department, then the lending institution may regulate the agreed selling price, closing commissions or may even ask to alter the terms and conditions of the deal as a whole. A short sale makes the buyer, seller and even the real estate agents, dependent on the lending institution as a short sale could not be made without the consent and agreement of the lending institution.
Agreeing a lender to a Short Sale
As already discussed, earlier that a lender takes much time to process a short sale request, so the request for a short sale by the property owner should itself be clear, concrete, definite and attractive to the lending institution so that it could be processed quickly. Following are some of the ways to make the request attractive and appealing to the lender:
1.Timing of the request: As soon as you feel struggling to make the timely payments of your loan, you should get yourself registered with a real estate agent and should immediately contact the “workout” department of your lending institution and should file a request for the short sale of your property.
2.Make your real estate agent your agent to negotiate with the lender: You should make your real estate agent an agent of yours who could negotiate the terms of the short sale with the lender on your behalf.
3.Make sure that the offer is made correctly: Make sure your real estate agent puts up the deal correctly and in an efficient manner to the lender, correctly depicting the terms of the deal, the down payment that the buyer is going to make and more importantly whether the buyer is a first time buyer or not as the lender (s) are more likely to accept short sale requests involving first time buyers rather than investors.
4.Filing of hardship letter: Make sure you write the hardship letter to your lender yourself clearly describing the financial problems you are facing and the solid reasons behind them. You should write the hardship letter in a manner that the requested short sale of your property is the only way out that could prevent you from filing a request for bankruptcy.
5.Make sure your short sale request is complete and clear: You should make sure that your short sale request is complete answering all the questions of the lender (s) in an unsolicited way:
-The offer from the buyer to purchase your property
-Your hardship letter
-Your monthly income and expenses along with your balance sheet
-Statements from your savings and other asset accounts
-A net sheet from your real estate agent listing all of the closing costs that must be paid for your short sale to close
-Your last two income tax returns.
You should make sure that the lender doesn’t come back to ask you any further things that are relevant. Your request should tell the lender everything in an unsolicited way.
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