A seller's short sale package will most likely consist of:. As a buyer, ask your agent for a list of comparable sales before you write a short sale offer. The bank will want to receive an offer as close to the amount owed as possible. The short sale listing price might not reflect market value. In fact, the property might be priced below comparable sales in an effort to encourage multiple offers. Some short sales can begin prior to an offer but banks will most often start the procedure upon receipt of an accepted purchase offer.
After the seller accepts the offer, the listing agent will send the listing agreement, the executed purchase offer, the buyer's pre-approval letter, a copy of the earnest money check, and proof of funds to the bank. They'll also submit the seller's short sale package. The short sale process will be delayed if the package is incomplete.
They may not send it back to you, attempting to reduce as much of the cost for themselves as possible. Buyers might wait a long time to get a short sale response from a bank. It's important that the listing agent call the bank regularly and keep careful notes of the progress. Some short sales get approval in two to eight weeks.
Others can take 90 to days on average. A top short sale agent can help to speed up the process a little by keeping informed of the offer's progress and holding the bank accountable.
Checking in with the bank at least once or twice a week is imperative. Recognizing the behavior of incompetent negotiators and requesting a replacement is often necessary as well. Never be afraid to advocate for yourself or escalate your actions up the management chain of the bank. Buyers might become tired of waiting for short sale approval and threaten to back out if they don't get an answer within a specified time period.
The process can be frustrating—both buyer and seller agents may need to work to reassure the buyer and seller that patience is necessary, as the wait can be lengthy. A listing agent will often have some idea of when approval will arrive as the file is sent for final review.
At that point, buyers might want to start the loan process and other due diligence so they've got a head start in case the bank allows only a few weeks to close. In order for a short sale to take place, both the lender and the homeowner have to be willing to sell the house at a loss.
The homeowner will make no profit, and the lender will actually lose money for selling the house for less than the amount owed. A short sale is not a do-it-yourself deal.
Deciding if a short sale property is right for you depends on your specific situation and the details of the property. One thing is certain, though: If you want to buy a short sale property, in most cases you need to be prepared for a lengthy, complicated process. Because the lender has to approve the short sale contract, it can take weeks or months before you know if your offer has even been accepted. A seller might be ready to accept an offer lower than the list price—maybe for the ideal closing situation or because they have a rushed timeline.
Before you consider buying a short sale home, you need to talk to a real estate agent who has experience with the short sale process. Need help finding an expert? Our Endorsed Local Provider program can help you find top-rated real estate agents in your area. As you interview them to find the best fit for you, make sure to ask about their experience with short sales. With the right real estate agent, you can navigate the short sale process with confidence!
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Guided Plans. Lenders may also get directly involved in the home price negotiations, often asking for a higher sales price than the home seller including the insistence that the buyer make all or most of the closing fees , in order to recoup more money on the home loan.
It's also highly advisable for a short sale buyer to work with a real estate agent well-experienced in the short sale process. It's also strongly advised that a short sale buyer hire a home inspection professional to thoroughly examine the property, as short sellers may not have the financial resources to keep up with home maintenance and repairs. Receive full access to our market insights, commentary, newsletters, breaking news alerts, and more.
I agree to TheMaven's Terms and Policy. What Is a Short Sale? Benefits of a Short Sale to a Home Seller If the property seller is presented with a short sale opportunity, it's a good idea to thoroughly vet all the options on the table, and calculate the risks and opportunities and look at other relative personal financial options, before making a decision.
Consider these benefits of a short sale: 1. Credit score advantages A short sale is highly preferable from a personal credit score point of view, especially when weighed against any potential home foreclosure.
Emotional advantages In many instances, a home mortgage is the biggest financial event of a person's life - at least before retirement. TheStreet Recommends. Any type of property sale that is denoted by a credit company as not paid as agreed is a ding on a credit score. This is because there are two parts to all mortgages. The first is the lien against the property that is used to secure the loan. It gives the lending institution the right to sell the property for repayment. This part of the mortgage is waived in a short sale.
The second part of the mortgage is the promise to repay. Lenders can still enforce this portion either through a new note or the collection of the deficiency. Whatever happens, lenders must approve the short sale, which means borrowers are sometimes at their whim. Short sales and foreclosures are two financial options available to homeowners who are behind on their mortgage payments, who have a home that is underwater , or both.
In both cases, the owner is forced to part with the home, but the timeline and consequences are different. A foreclosure is the act of the lender seizing the home after the borrower fails to make payments. Foreclosure is the last option for the lender. Unlike a short sale, foreclosures are only initiated by lenders.
The lender moves against the delinquent borrower to force the sale of a home, hoping to make good on its initial investment of the mortgage. Also, unlike most short sales, many foreclosures take place after the homeowner abandons the home.
If the occupants are still in the home, they are evicted by the lender. Once the lender has access to the home, it orders an appraisal and proceeds with trying to sell it. Foreclosures do not normally take as long to complete as a short sale, because the lender wants to liquidate the asset quickly. Foreclosed homes may also be auctioned off at a trustee sale, where buyers bid on homes in a public process.
A homeowner who has gone through a short sale may, with certain restrictions, be eligible to purchase another home immediately. Depending on the circumstances, homeowners who experience foreclosure can expect to wait two to seven years to purchase another home.
While a foreclosure essentially lets you walk away from your home—albeit with grave consequences for your financial future, such as having to declare bankruptcy and destroying your credit—completing a short sale is labor-intensive.
However, the payoff for the extra work involved in a short sale may be worth it. Less disruptive alternatives to a short sale include loan modification and utilizing private mortgage insurance.
Before resigning yourself to a short sale, talk to your lender about the possibility of a revised payment plan or loan modification. One of these options might allow you to stay in your home and get back on your feet.
Another possible option for staying in your home arises if you have private mortgage insurance PMI. If the PMI company thinks you have a chance at recovering from your current financial situation, it may advance funds to your lender to bring your payments up to date. The source of the financial trouble should be new, such as a health problem, the loss of a job, or a divorce, rather than something that was not disclosed when the homebuyer originally applied for the loan.
However, if you feel you were a victim of predatory lending practices, you may be able to talk the lender into a short sale even if you have not had any major financial catastrophes since purchasing the home.
To put yourself in a more convincing position to complete a short sale, stop purchasing non-necessities. Be aware of other circumstances that may prevent the approval of a short sale. If the lender thinks it can get more money from foreclosing on your home than from allowing a short sale, it may not allow one. If someone cosigned the mortgage, the lender may hold that person responsible for payment rather than doing a short sale.
If you think your situation is ripe for a short sale, talk to a decision-maker at the bank about the possibility of engaging in this type of transaction.
At this point, you should consult an attorney, a tax professional, and a real estate agent. While these are high-priced professional services, if you make a mistake by trying to handle a complex short-sale transaction yourself, you may find yourself in even bigger financial trouble. You may be able to pay for these service fees out of the sale proceeds from your home. Professionals accustomed to dealing with short-sale transactions will be able to give you guidance on how to pay them.
When setting an asking price, make sure to factor the cost of selling the property into the total amount of money you need to get out of the situation. Of course, you want to sell the home for as close to the value of your mortgage as possible, but in a down market, there is bound to be a shortfall.
In some states, even after a short sale, the bank will expect you to pay back all or part of that shortfall. These may include bank statements , medical bills, pay stubs, a termination notice from your former job, or a divorce decree. It is up to you to come up with a proposal.
Be aware that the lender ultimately must approve a short sale after receiving all the details because the lender is the recipient of the proceeds.
Your job is to find a buyer for your home. Along with the documentation of your distressed financial status, your proposal should include a hardship letter explaining the circumstances that are preventing you from making your mortgage payments.
You want to make it as convincing as possible and protect your interests while also appealing to the bank.
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