The Short Sale Process

A short sale is a process of selling a home for less than the current balance of the mortgage. This type of sale can potentially be the best way of preventing foreclosure on your home and your credit. A short sale can occur when a property owner is unable to make payments to a lender on his mortgages and is also not able to sell the property because he owes more on his house than its current market value.

The first step of a short sale process is to contact the lender that is generally a bank that has given you a loan for buying the property to inquire about the possibility of a short sale and see if it is open to the idea. Your bank will not actually vote for the short sale offer, but you should try to pursue it by holding a discussion on the topic.

Hire a short sale agent to represent you in this process. It is best to hire lawyers or short sale real estate agents who have handled and managed to negotiate similar settlements. The real agent does a fair and accurate assessment of your property’s value. Market value is generally determined by comparing prices of other properties of the same age and size that have recently been sold in the area and this evaluation is called a comparative market analysis. Then the agent markets the property to begin a short sale. You will have to issue an authority letter that allows disclosure of personal information about the property and the loan to the real agent and the buyer.

When you receive an offer from a potential buyer, take it to the bank. The fact that you accepted the offer does not necessarily mean that the bank will also approve it. Send the bank’s services the proposal along with any other information that it requires. Many banks prefer that you write a hardship letter that explains in detail your financial difficulties. The bank usually wants to validate the seller’s situation by examining his bank statements, investment accounts, receipts and other financial records.

After examining the condition of property and its current market value the bank checks with the realtor to obtain an opinion on the price. The purchase agreement is also reviewed to see whether all amounts including the real estate commission are reasonable and acceptable. Wait for a response from the lender on the short sale offer. During this process, you have to be very patient as it may take some time. In some cases, lenders take three to six months before the completion of the process of a short sale. If your bank accepts the offer, then you can sell the house and move out. When the property is sold, a sales contract showing that the selling amount has been sent to the bank or authority is signed. The lender then makes a final decision on whether to forgive any remaining debt or not.

When considering the various options for foreclosure avoidance like reducing your expenditure, selling all your assets and putting the proceeds to repay the mortgage or the worst filing for bankruptcy, a short sale process is a bit complex but the safest and foolproof answer to the question, “How to avoid foreclosures?”

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