As a seller, you list your home and typically you list it for less than market value in an attempt to entice buyers and to get a quick sale. Every lender is different - some make you (as the seller) negotiate with them up front as to whether or not they will accept a short sale on your home/condo, and some lenders require you to find a buyer, negotiate a price and then present them with the option of the short sale at that time.
Either way, as a seller it is a long and difficult process, if this is the situation you are in, I suggest you hire an agent who is well versed in short sales and has had several themselves. In addition to that, you need to speak with an attorney and/or your tax person to better help explain to you things like the tax and credit ramifications of a short sell.
On the buying end of it, be prepared to be patient. You can often get a great deal, but depending on your time frame, most banks are taking anywhere from 2-4 months to negotiate and close short sales. If the seller has 2 loans (both from different lenders), it could even take longer. Make sure when you do write an offer that the time frame in which you have to do your inspections etc. and to remove your contingencies, does NOT begin until the bank(s) have fully approved the short sale in writting.
Hope this helps....sorry for the long answer...but short sales are not easily explained. Please let me know if you have an further questions on short sales!
1. â€œHow To Avoid Foreclosureâ€ by the U.S. Department of Housing and Urban Development (HUD): http://www.hud.gov/offices/adm/hudclips/forms/files/pa426h.pdf Yes, I know these are long but they get you right to the information you need rather than going through the whole site.
2. â€œTips for Avoiding Foreclosureâ€ also by HUD: http://www.hud.gov/foreclosure/index.cfm
3. â€œList of Approved Credit Counseling Agenciesâ€ by the U.S. Department of Justice: http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm
4. â€œYou Can Avoid Foreclosure and Keep Your Homeâ€ by FHA : http://www.fha.gov/foreclosure/index.cfm
5. â€œMortgage Payments Sending You Reeling? Hereâ€™s What to Doâ€ by the federal trade commission: http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea04.shtm
6. â€œQuestions and Answers on Home Foreclosure and Debt Cancellationâ€ by the IRS: http://www.irs.gov/newsroom/article/o,,id=174034,00.html
If you are thinking of buying a property that is in a short sale situation, be prepared to have to wait, and wait, and then wait some more for the deal to actually happen.
The mortgage lender will want to know the circumstances that caused you to fall behind on your mortgage payments and what your future financial prospects for repayment may be. They will also do their own assessment of whether it is more profitable to approve the short sale or repossess the property and put it on the market themselves. Although most mortgage companies are helpful, their goal is to make money so they can ultimately decide to proceed with foreclosure.
A few things to know... you have to be in serious financial hardship to be eligible. You need to write a letter of hardship to your lender and prove that you have no assets, including other property. Also, you can be taxed on the amount you come out short when the sale is closed. If you or anyone reading this has any questions on the short sale process let me know.