Please listen and understand. A short Sale is a grace of God move by the financial Institution that allows the loan owner to get out from a financial mess.
There are rules to be followed, there are questions that need to be answered,
â—¦First you have to be in financial hardship and you have to be behind by 3 months or more of mortgage payments
â—¦You must not have equity enough to pay off the principal
â—¦you must abide by the rules of your financial institution
â—¦you must keep in mind that any time in the short sale process, your bank can turn around and start the foreclosure process and end your hopes of a short sale.
â—¦Short sales are a contract with a first and second party. these parties do sign the contract and are bound to all that the contract holds to be true.
â—¦Unlike a normal contract, there is no closing date or if there is it has no bearing to completion of the sale
â—¦There is a third party in this contract and there will be added verbage somewhere in the contract that will mention that and also advise all involved that this third party has full control of this contract even though they have no signature on this contract
â—¦The asking price may not be the price that will be accepted
â—¦The offered price, even if higher than the asking price may not be accepted
â—¦The bank can refuse any offer
â—¦The bank can accept any offer
â—¦The bank will have several pages of addenda that will need to be signed if they do accept
â—¦Never assume that the bank which is a third party
â—¦The Bank can take as long as they want deciding on an offer
â—¦The Third Paty can decide on smaller commission to the agents involve, the can also decide on no commission at all.
â—¦The Third Party can at any time disrupt the continuity of the sales process.
â—¦The paper work for a short sale has to be 100% complete for both seller and buyer or the third party's underwriter for the short Sale can leave the offer and the contract in Limbo for as long as it takes for said paperwork to be submitted, often telling no one what is left to sent in. You must be sure that your agents know how to handle a short sale.
â—¦Do not pursue a short sale if you are looking to buy a house quickly
â—¦never think that a short sale is a cheaper or better deal, there are times that a short dale has sold for proper market value and a rare few that sold for more than market value.
â—¦If you enter into a short sale, you may want to have a Real estate attorney on hand to understand the full procedure and any interpetations of the contract wording, Agents and Realtors are not allowed to advise you in matters but rather to make sure the sales process goes smoothly and correctly.
â—¦Please always sit down with your Realtor or Agent and explain what you are looking for in this market and listen to what they tell you. You may find some very good deals that are not foreclosures or shart sales so please keep you mind and heart open to some of the market advice we have to offer. We work every day in the market and are familiar to what are good deals and which are not!
â—¦Good Luck to everyone that are getting ready to look or are already looking for that perfect home, take you time and don't jump on preceived good deals but weigh them all out and look for the pros and cons of every house you look at!
â€¢ Lender's consent and approval required.
â€¢ The lender accepts the sale as payment in full for the loan.
â€¢ The property owner escapes foreclosure, but receives no funds from the sale
â€¢ There can be no equity in the property
â€¢ Seller cannot bring money to the closing.
â€¢ Lender does not report foreclosure to the credit bureaus.
The lender will require various documentation. The incentive for the lender is to remove the account from their books before the loan becomes a problem. It can also cost a lender $25,000 to as much as $50,000 in order to send the property through the foreclosure process. Technical requirements for a short sale: (May differ from lender to lender)
â€¢ Owner must demonstrate hardship/financial insolvency (i.e. loss of employment, illness, divorce, catastrophic illness, death of a spouse).
â€¢ Seller must prepare a hardship letter asking lender to accept short sale.
Documentation that may be required by lender to determine if owner qualifies for a short sale.
â€¢ Listing agreement with Realtor showing the property is on the market for sale.
â€¢ Comparable market analysis which includes sales and listings
â€¢ Bank statements
â€¢ Pay stubs
â€¢ Tax returns
â€¢ Purchase/Sale Agreement
There are drawbacks to the short sale.
â€¢ A deficiency balance could be charged off which could result in negative credit bureau reporting.
â€¢ If the cancelled portion of debt exceeds a certain amount, the homeowner is required to report the forgiven amount as income on his or her tax return.
As always, any property owner should seek legal and financial advice before entering into this type of transaction.
First of all, you need to make sure that you have enough time. It takes anywhere from 30 days to 6 months or even more to get an answer on a short sale. It really depends on many factors. It requires a proof of funds letter if paying cash or a pre-approval letter from a lender if obtaining a mortgage. The seller must approve the purchase offer before it gets submitted to the bank. The bank may come back with a counteroffer or reject your offer completely. In some instances you may not even hear back from the bank at all.
Short sales take a long time because the bank has to review it and they are back logged with many short sales and don't have enough coverage to complete them in a timely manner. The bank typically is willing to work with the seller and buyer on short sales to help avoid foreclosure.
One of the benefits of buying a short sale is that the bank is typically willing to accept less money for the property because of the time and risk involved. So you generally are getting the home at below market value.
If you have the time to wait, a short sale is a good way to go. One thing to be sure to ask when purchasing a short sale is, "who is handling it?" Is the Realtor an experienced short sale expert? Or is the listing agent using a Short Sale company that strictly focuses on short sales? By having someone with knowledge and expertise in short sales, it will make the process go much smoother and faster.
Gerard (below) gives good information. However, you do not have to be behind 3 or more months in mortgage payments. Actually, it is better for your credit if you don't go delinquent (if possible). It is the delinquencies that affect your credit the most. I have closed several short sales where the sellers were not delinquent but had true financial hardship.