Short Sales

Short sales are when the seller and the lender agree to accept a price, which is less than what is actually owed on the mortgage. The homeowner will not have to go through the embarrassing process of an actual foreclosure; the lender doesn’t have to be burdened with getting rid of the property; and the investor gets the property at a discounted price. Short sale properties are sold “as is.”

A short sale isn’t always pleasant for the homeowner. Though most lenders will not require the homeowner to pay the difference in what is owed on the mortgage and what the short sale price is, the homeowner’s credit will still be damaged, though not as much as an actual foreclosure.

Not all lenders will agree to accept a short sale, especially if it would make more financial sense to actually foreclosure on the homeowner. In order for a homeowner to qualify to sell his home at a short sale, he must be several months behind on his mortgage payments and must already be in default. In addition, sometimes the lender may require the homeowner to pay the deficiency in the price between what is owed on the mortgage and the actual short sale price. Already financially strapped, most homeowners would not want to be burdened with a deficiency to get rid of their home and will choose to let the house foreclose.

If a homeowner decides they have no other option than to sell their home through a short sale, there are several things they need to provide to the lender before they can sign a purchase agreement with the foreclosure investor:

• Contact the lender. It may take several calls to get to the right person to talk to about selling the home for a short sale price. Be sure to speak with the person who can actually make the decision.
• Submit a letter of authorization, which will allow the investor to speak with the lender on behalf of the homeowner.
• Submit a hardship letter, which will describe financial status and inability to pay mortgage payments, i.e., loss of job, illness, etc.
• Provide proof of assets and income, such as savings accounts, money market accounts, etc.
• Provide copies of bank statements.
• Provide a preliminary net sheet showing what price is expected to be received from the sale of the home.
• Provide a comparative market analysis showing why a short sale price is needed to sell the home.
• Provide a purchase agreement showing the short sale offer.

Once the homeowner has submitted the purchase agreement between him and the foreclosure investor to the lender, the paperwork will be drawn up by the lender’s representative, and the closing date will be set. When a homeowner agrees to sell at a short sale price, he will not receive any of the proceeds of the sale.