For owners who can no longer afford to keep mortgage payments current or cannot "afford" to sell their home, there are alternatives to bankruptcy or foreclosure proceedings. One of these options is called a "short sale."
A short sale is when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.
When lenders accept a short sale, they are accepting to take the loss of the difference between the home's selling price and what is currently owed. For example: If the unpaid balance of a loan is, $150,000 and a property sells for $130,000, under a short sale the lender might accept $130,000 as payment in full and is "shorted" $20,000.
The banks would rather take a loss today than get the home at Sheriff Sale and take a bigger loss later and the advantage to you is that the bank will pay me to sell the house for you. If you're considering a short sale, please take the following steps:
- Contact me. I'm knowledgeable and experienced in short sales so I can help you determine if this is an option and I will help you through every step.
- Contact Your Lender. Typically you have to talk to someone in the short sale or "loss mitigation" department, however it may take several calls before you actually speak to someone who can help you. Have your account numbers ready.
- Submit a Letter of Authorization. The lender will not disclose any of your information without authorization. If you're working with a Realtor, a lawyer, or title company, you will receive better cooperation if the lender has authorization to speak to those parties regarding your loan.
- Preliminary Net Sheet. This is an estimated closing statement showing the expected sales price, unpaid loan balance, outstanding payments due and late fees, and real estate commissions. If your net to seller shows money to seller at closing, you do not need to do a short sale.
- Hardship Letter. This is a letter to the lender explaining how you got into the financial bind you're currently in. Typical examples are loss of a job, substantial medical bills, death in the family, etc.
- Proof of Income and Assets. You must be truthful and disclose any assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiven.
- Copies of Bank Statements. Lenders will need these once the process is started. If they show large transfers or withdrawals, those will need to be explained.
- Comparative Market Analysis. There are many declining markets based on the current economy. This may be the reason you cannot sell your home for enough money to pay off your mortgage. I can provide this information to the bank for you, showing comparable active, pending and homes recently sold in your area.
- Purchase Agreement & Listing Agreement. The lender will require copies of this documentation and must approve the selling price. I will act on your behalf as the mediator between your lender and the buyer's agent.
Please keep in mind your credit score will be affected. On average your score can be reduced approximately 90 points vs. a foreclosure which is around 150.
If you have any questions, or would like to discuss the option of selling your home as a short sale, please contact me at 614-581-8987.