Overview of what a Short Sale is
So what is a short sale? A short sale is a term used to describe when more debt is owed on a property than what the property is actually worth. The owner can’t sell the property unless the holder of the mortgage agrees to accept a payment that is short of the amount that the owner owes.
Conducting a short sale is really like a pre-foreclosure. You are just securing a buyer prior to your sale date.
Short sale is conducted like a regular real estate transaction. It is once you receive an offer that the short sale process actually begins and it is up to your default specialist to bring in a purchaser.
There are a number of forms that need to be processed for the short sale to take place. These are referred to as short sale documents and are sent to the bank.
These include:
- Authorization Letter
- Payoff Request
- Bank Statements
- Do Not Call Form
- Last two federal tax returns
- Last two pay stubs
- Buyer Loan Approval
- Estimated HUD
- Real Estate Purchase Contract
- Exclusive Listing Agreement
- Financial Worksheet
- Hardship Letter
For a smooth transaction, once you have a purchase contract for your property, these documents are required to move forward on your short sale.
- Your home is generally shown to both traditional buyers and investors.
- The goal is to get the highest offer in the shortest amount of time.
- All offers are signed and submitted to the lender for review.
- When the lender accepts an offer, that particular offer needs to be signed by you for escrow to be opened.
- Once the offer(s) is sent to the lender(s) the short sale process can take anywhere from four weeks to four months and varies with each lender.
- Once the lender reviews the short sale package, they will order a BPO (Broker Price Opinion) which is similar to an appraisal.
- Once the lender receives their report they usually make their decision shortly thereafter.
Your property remains on MLS until the lender accepts the offer. As this is not a regular transaction it can take longer to complete so you’ll need to be patient.
Once the offer is accepted by the lender, escrow can be closed anywhere from 10 – 30 days.
You as the seller do not need to attend the closing. In most cases you could grant your lawyer power of attorney and he/she will act for you at the closing table.
After your short sale is completed your mortgage payments are extinguished and it’s time to start working on restoring your credit again.
Try not to incur any new debt and keep balances low on credit cards.
Do not pay late on any accounts and if you rent, pay by check so it can be tracked to show you are paying on time. Many people will rent for a short time to give themselves a breather and until their credit is repaired.
When it’s time to get back into another house, working with the right people is essential.
You will be in another house in no time!
