Real Estate is totally different today than it was just ten years ago, especially because of the “Great Recession”. One thing that has changed is that, more than ever, the term “Short Sale” is now a hot topic that almost anyone paying attention to the news media must have heard. Many sellers who have determined that they can’t sell their home for the amount they owe are now considering doing a short sale instead of allowing the lender to foreclose. But is it always a good thing? How can you tell whether a short sale is right for you? Let’s take a look at some guidelines that will help you decide.

What a Short Sale?

Nowadays, a lender will agree to accept a lesser amount for the sale of a home than the amount which is due. This is considered a short sale. For instance, perhaps the home mortage is $150,000, but the home is worth only $120,000. This means you are $30,000 short. This is not even considering closing costs, recording fees, real estate commissions, or title charges.

Why will a lender approve a short sale?

The lender who agrees to the short sale does so to avoid going through foreclosure and incurring the costs associated with it. When the lender approves a short sale, they are basically allowing the buyer to purchase the home for an amount less than the mortgage balance.

Here is an example of a short sale, in five steps:

• The seller and real estate agent sign a listing agreement; the home is listed for sale on the Multiple Listing Service (MLS) as a short sale pending the approval of a third party (your lender).
• The agent finds a buyer who makes an offer that is less than the mortgage amount (an amount that reflects the current market value).
• The seller accepts the offer.
• The short sale negotiation with the lender starts once the agent submits the short sale packet (the offer contract from the buyer and other required documents from the seller).
• The lender accepts the purchase offer.
• The buyer presents funds, the lien is released, and the seller signs the deed to the buyer at closing.

It’s a great solution, as long as you’re a good candidate for the short sale.

What are the qualifications that indicate that the short sale is right for you?

• Your home’s market value should have dropped. Furthermore, you need to be able to substantiate that the home is now worth less than the balance that is still owed on it.
• The mortgage should be near or in default status. At one time, lenders wouldn’t even consider a short sale when payments were current. That’s changed because lenders are now considering Strategic Short Sales as well. Many lenders now, understanding that other factors might contribute to a possible default, want to head off future problems. Therefore, they are open to consider a short sale.
• The seller should have fallen on hard times. This means that you, the seller, should expect to demonstrate to the lender why you’re not able to keep making payments on your mortgage. As in you need to show the true reason for your financial hardship which should include why you have or will soon stop making monthly payments.

So what constitutes hardship?  Any of the following usually qualify:

• Unemployment
• Death
• Bankruptcy
• Medical Emergency
• Divorce
• Lack of Assets by the Seller

On the other hand, the following usually are not accepted as financial hardships:

• Problems with the Neighbors
• Plans to Buy Another Home
• Bad Spending Decisions
• Pregnancy
• Plans to Move to an Apartment

Keep in mind that usually, the lender will ask for a copy of your tax returns or other financial statement. The lender might not grant the short sale if he discovers that you, as the seller, have significant assets. They’ll feel—probably correctly—that with those assets, you should be able to pay the balance. This doesn’t mean that sellers with assets are never granted a short sale.  But when they are, they are frequently asked to repay part of the short-fall.

In conclusion

Finally, remember that being granted a short sale will depend on if there is a buyer who makes an offer to purchase and the experience of the real estate agent negotiating the short sale.  Without such an offer, you won’t qualify and without a seasoned agent working on your short sale, it will not get approved by your lender. It also will depend on whether or not the lender agrees to accept the buyer’s offer. The short sale will not take place of the lender rejects that offer.

Bottom line: The short sale is not a miracle pill that will solve all problems for the person who is behind on their mortgage payments. However, it can be a life-saver for the person who meets all of the qualifications. If you are a Maryland (MD) homeowner in needs of an agent with proven short sale experience? Check out one of my successful, approved short sales and then feel free to contact me. I will be glad to answer all your questions!

Questions for you

• At what point would you think that a short sale is the only option left for you?
• What would keep you from considering it? Tell me your thoughts.

Visitors who read this post also read:

• A True Foreclosure Story – Note: the tale you are about to read might be yours!
• Maryland short sale approval success story: $91K Forgiven (discounted) by American Home Mortgage Servicing
• Free Short Sale Seminar for Maryland Homeowners on How to Stop Foreclosure by Owen McGab Enaohwo; a Realtor and Certified Short Sale Specialist

Painting the picture – You are a homeowner experiencing a financial hardship, you have lost your job and can’t keep up with your mortgage payments. You desperately need to find a solution to the problem because it’s weighing down heavily on you. You can barely function or think properly because it feels like your whole world is crumbling and you need to get you life back on track.

The credit police – You are tired of creditors, especially your mortgage lender hounding you or worse not even responding to your inquiries for help. You really do not want to sell your home if you can help it but realize that not only has the home lost its value, even if you could get your lender to reduce your monthly mortgage payments, you still will have tons of negative equity and your reduced monthly payment would hardly do anything to reduce the underlying principal balance that you owe. What you really will prefer is for your lender to reduce the principal balance and the monthly payment at the same time so that you can keep the home but heck that isn’t going to happen and you know it. To make matter worse, you just watched a report on the news that stated that most Loan Modifications don’t work and the borrowers eventually end up defaulting again.

A friend indeed – You have started talking to your friend about your situation and as true friends they sympathize with you. The solutions they suggest to you only serve to confuse you; it’s not really their fault because you know that they might have gotten their information from the wrong source. Then you realize that you need to talk to a professional who can give you sound advice on how to avoid foreclosure.

The mailbox overflows – Everyday your mailbox gets a new dose of letters, postcards and all sorts, you are sure now that even the mailman knows your situation and are afraid your nosy neighbors might be in on it too. Not only do you have to put up with constant calls from your creditors and so on, now it seems everyone from your lenders to others offering “scam-like” help in exchange for upfront payments are now waging a war on your mailbox. Something has to be done about this, enough is enough!

Seeking Professional Help – Your online research for a solution to your problem is finally paying off. You have been proactively seeking a way to avoid foreclosure that you now know the term “Short Sale”. At first you thought it meant the property will sell quickly but then you find out that it means that the lender accepts a “short payoff” – a lesser amount at the sale of the property instead of what is actually owed to them since the property has lost its value. You call your mortgage lender demanding a short sale and they tell you that you first need to get a Real Estate Agent to list your property, find a buyer, negotiate the short sale, and get it sold. They also tell you all the list of documents you need to put in place, the estimated length of time the negotiation might take, all the steps involved and so on it begins to seem so mind boggling and you wonder why it’s not called a “Long Sale”. You almost give up but persevere and decide to find a real estate agent who specializes in short sales.

Get the door, help has arrived – You finally found a real estate agent with a proven experience and track record getting short sales approved and sold. The agent even insisted on showing you video testimonials from past and recent clients who vouched for their ability to provide the short sale solution that you desperately need. The agent walked you through the entire process, explained any new laws, guidelines and processes that will affect the outcome of the short sale and answered all your questions; now you feel like you can begin to breathe again. The agent signs the necessary listing paperwork with you and puts the property on the “Multiple Listing Service” (MLS) at the right price to bring in a flood of buyers looking for a great deal. You finally receive an offer and the agent puts together all the necessary contract paperwork from the buyer and collects all the documents that your lender requires from you in order to submit the complete short sale packet.

A favorable ending & new beginnings – After couple of weeks that seemed shorter than you had previously expected, your agent was not only able to get the short sale approved, he was able to work efficiently and effectively with all parties involved in the transaction in order to get to closing the sale. Now today you are at the closing with the buyer. You can’t help but smile because you know that you are about to sign the closing documents which means you are about to take the first step toward a better future; you can now begin to see this entire nightmare from the rearview mirror as you drive away to your bright future!

Your call To action – I have taken the time to go through the pain and suffering that millions of homeowners are currently going through. The sad reality is that most of them are not proactive and do not seek a solution to their problem; many show signs of the “ostrich syndrome” and stick their heads in the sand, do nothing and hope that their problem will disappear by means of a miracle or some magic “Genie”. Many of such people end up in foreclosure which in itself is not something you should have to endure or have on your record especially when it can be avoided altogether. I am happy now because I know that you are not the type of person to do nothing; I know now that you are proactive because you have read this blog post all the way to the end, so congrats! What you need to do now is call up your local Real Estate Agent, interview them and get a sense of their experience negotiating short sales. Once you find the right fit, have them list your property and begin the short sale process. If you just so happen to be a proactive homeowner in Maryland in need of a short sale then allow me to provide you with the solution that you need and the peace of mind you deserve! You can contact me simply by clicking on this above and entering in your details. Note I will treat your information with the utmost care and will respect your privacy. Cheers! Smile because your solution provider awaits you!

Question for you:

• Do you think homeowner’s experiencing financial hardship should sell their properties as a short sale or keep it? Please explain your answer.

Visitors who read this post also read:

• Is a Short Sale Right for You? Read and then Decide!
• Maryland short sale approval success story: $91K Forgiven (discounted) by American Home Mortgage Servicing
• Free Short Sale Seminar for Maryland Homeowners on How to Stop Foreclosure by Owen McGab Enaohwo; a Realtor and Certified Short Sale Specialist

I know the title got your attention but before you pass judgment, I suggest you read the entire blog post and then tell me what you think by leaving a comment.

Why do you want to strategically default?

A few years ago, you applied for a mortgage to buy a home for your family to live in and have a roof over their heads. It was meant to be an investment, a means for you to increase your total net worth and move up to the next level in life. You were so glad the bank approved your loan that immediately after buying the house, your family moved in and you began to live the American Dream of Home Ownership or so you thought. Not too long after that the dream became a nightmare; the economy began to tank, you had problems with your job and you bills started piling up. You started having a hard time keeping up with your mortgage payments. Even then, you kept on paying your mortgage.

A few months back, you learned that the value of your “dream home” – the one your family lives in, the one you borrowed money from the bank, the one that you keep paying the monthly mortgage because it’s the right thing to do – is less, so much less, than the initial amount of the loan that you got from your lender. After all, your home was meant to be an investment, and according to what you were told, overtime you were supposed to pay down the mortgage and build equity. So you ask yourself – “Should I keep paying the mortgage for this house when its value is less than the amount that I am paying for?” That is very good question, and in this blog post I have attempted to answer it and suggest options that you have available to you that you might have not been aware of. So please keep reading!

Strategic Default- what’s that?

According to Wikipedia “A strategic default is the decision by a borrower to stop making payments on a debt despite having the financial ability to make the payments”. Let it be clear that my personal and professional opinion on this matter is that it’s morally right to follow through on your obligations to your lender and the main reason I have taken the time to blog about this sensitive topic is to make sure you know that you have an option called a “Short Sale” that will greatly benefit you and your lender. Even though it might seem that the right choice is to simply walk away from a bad debt; stop paying, give up and live your lender to sort out the mess. I am here to say that there is another way! Before I explain what short sale is and why it’s a better choice, let’s back up a little bit.

Why do you have to keep paying your mortgage?

Paying for something that is less in value than the amount that you are paying for it is actually silly. Yes, that’s right. It is out right silly. When companies make an investment that turns out being bad, guess what? They retract, regroup and cut their losses. Why pay a hundred grand for a car that is only worth 60?

But in reality, when you got the loan, the property was valued at a higher amount than what it is now and most people expected values to keep rising. After sometime, maybe 2 or more years, property values went south, and your loan amount ended up greater than the property value. When you bought the home, no one had an idea that property values would go south because values had been going up for years prior. You had an agreement with your lender that you will pay for the mortgage, and pay a certain amount every month until you pay up the whole amount, including interest.

If you did not agree to pay for X number of years, your lender would not have given you the money to buy the house in the first place. You and your lender made an investment decision but instead of strategically defaulting, I suggest you move in another direction, one that not only shows that you are morally right but puts you and your lender in a much better situation.

Why a Short Sale is the best option?

Even if not paying your mortgage seems to be the logical thing to do; there are still other options available such as a short sale. The effect of a short sale on your credit is minimal when compared to a foreclosure. When you walk away from your mortgage, your lender will foreclose your property. When your property is foreclosed, your credit rating takes a huge hit, and you will not be able to get a mortgage to acquire another house for the next 7 years, even if your financial situation improves. Why? Because you walked away from your mortgage obligations and your house got foreclosed. That’s why. On the other hand if you sell your property as a short sale you will be able to qualify for a mortgage within 2 years and buy another home, assuming your financial situation gets better.

Why you should not strategically default on your mortgage?

You can avoid a foreclosure by being upfront with your lender and telling them that though you want to keep paying your mortgage, it’s not financially feasible. Point out the fact that your property’s value is “underwater” – meaning – less than the remaining amount of the loan that you took out a few years ago.

This under normal circumstances will qualify you for a short sale. You can sell your property at a price that reflects its current value which is less than the amount that you owe your lender. Previously in a short sale, all the proceeds of the sale will go to your lender but now assuming your lender follows the Home Affordable Foreclosure Alternatives (HAFA) program outlined by the Treasury Department for short sales, you can get $3,000 towards your moving expenses. Your lender will agree to accept the payment from the sale, and forego the amount that is “short” of the total amount that you owe them.

In a short sale, you avoid foreclosure. Your credit rating does not take a big hit. And you can purchase another home after two years.

As a professional real estate agent, I favor a short sale instead of a strategic default. A short sale is more advantageous to you, while a strategic default can be disastrous.

Read my other blog posts so you can learn more about short sales. If you are a homeowner in Maryland in need of a short sale I will like to be of service to you and answer all the questions that you might have. Click this link and completely fill out the questionnaire to get a hold of me immediately!

So what do you think, should homeowners strategically default on their mortgage or sell their property as a short sale? Please leave your comments and questions on my blog, I am eager to get your opinion!

Visitors who read this post also read:

• Short Sale VS Foreclosure VS Deed-In-Lieu of Foreclosure; which of these represents the best choice for a homeowner in distress
• Documents required by lenders in order to begin the Short Sale process
• What is a Short Sale and why you should have one done for you by a Licensed Real Estate Agent

You have been hit so badly by the economic downturn. Your finances are not in a good shape. You’re having a hard time paying the mortgage on the house, and you are sure that in time the lender will start foreclosure proceedings against you. You want avoid that, but don’t know how. A short sale can help you avoid foreclosure. Do you have an idea what a short sale is? Do you know of any one who went through the short sale process?

I will define the term short sale, so you can make an informed decision on whether to go through with a short sale or not, but before that, let me take a step back and discuss your current situation. This is the common process everyone else went through before they decided that a short sale was in their best interest.

How you got to where you are now

You had to take a loan from a lending institution and your house was used to secure the loan. The loan is most likely for the house you are living in right now; or maybe for something else. You are going through financial hardships, and you have been unable to pay the monthly payment for the loan. You are also more than 60 days behind in payments. You are aware that the value of your property is less than the amount you owe the lender. The lender has been sending collection notices and could initiate foreclosure proceedings against you. You want to avoid a foreclosure. And honestly, your lender wants to avoid foreclosure too. But if they allow time to pass, your loan interest and penalties will increase, and the lenders loss due to your non-payment will also increase. You and the lender are in situation where both of you are losing.

A short sale benefits you and the lender

A short sale allows you and the lender to lessen your losses, keep this in mind because it is the most important reason for deciding to move forward with a short sale. Plus, you are the one who initiates the process to begin with. In a foreclosure, it is the lender who takes action. In most cases, the lender will find ways to avoid initiating a foreclosure. Why? Because a foreclosure process is lengthy and costly for the lender, and the lender does not receive any payments from you, only the deed to your house. One important detail you should be aware of is this -in a foreclosure, you will not be able to get a loan to buy a new home within 5 years, even if your financial situation has improved. In a short sale, you can buy a new house 2 years after. The cost to the lender is lesser, plus, you are able to pay part of the loan amount that you borrowed from the lender. You can negotiate the remaining balance of the loan with the lender. You are also able to avoid foreclosure, a word many financially challenged homeowners were not able to avoid.

How to start the short sale process

This course of action begins when you, the borrower decides that a short sale is the best option. You start the process by contacting a local Real Estate Agent to assist you by listing the property for sale on the Multiple Listing Service (MLS). Immediately the agent will contact your lender on your behalf to make them aware of your situation and the need for a short sale. This is done so that the agent can get the list of all the necessary documents your lender will require and also to find out what steps that your lender requires you follow in order to begin the short sale process. Having a professional real estate agent assisting you with this process will allow you to maximize your time with other pressing concerns. The real estate agent will represent you in negotiating the short sale with the lender and getting it approved; from listing the property and up to the point where your house is sold.

Now, please bear in mind that in a short sale, you will not receive any payment from the buyer of your house because all of the proceeds will be paid to the bank to pay for your loan. And that amount is usually less – or short of – the total amount you owe the lender. The short sale process is initiated to lessen everyone’s – you and the lenders’ – loss.

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Do you know a homeowner in financial distress? Do you think a short sale will be right for them?

Give this much thought. If you have questions, feel free to ask me and don’t forget to leave your comments and suggestions on my blog.

Visitors who read this post also read:

• Is a Short Sale Right for You? Read and then Decide!
• A True Foreclosure Story – Note: the tale you are about to read might be yours!
• Short Sale VS Foreclosure VS Deed-In-Lieu of Foreclosure; which of these represents the best choice for a homeowner in distress

The entire foreclosure process can be very stressful for homeowners; some get so depressed, that they do nothing about it. While others who are proactive sometimes end up being given the wrong advice or make decisions that are not well informed. If you are a homeowner dealing with this situation, you will have to make a decision on whether to get your property sold as a Short Sale usually at the discount approved by your lender, or give the property back to them as a Deed-In-Lieu of Foreclosure or just let them complete the Foreclosure. You need to decide which of these three options is the best for you both in the short and long term? Deciding which option to take might be tough especially if you do not know how each will affect your credit and ability to buy a home in the future.

Short Sale VS Foreclosure VS Deed-In-Lieu of Foreclosure

A short sale transaction occurs when a lender agrees to a discounted payoff on the loan balance, due to the financial hardship experienced by the homeowner and/or a decrease in the resale value of the property. A short sale is the best option if you are facing foreclosure because it is a lesser financial loss. You get to avoid foreclosure, reduce the adverse effects on your credit and increase your chances of getting a loan to buy a home within a shorter period of time.

Foreclosure occurs when a lender sells or gets back a parcel of real property, after the owner failed to conform to their mortgage or deed of trust agreements. The estate becomes the absolute property of the lender. The foreclosure process generally starts with a formal demand for payment in the form of a letter called Notice of Default (NOD) issued from the lender. It varies from state to state but in most cases the lender usually issues this notice when the homeowner has been 3 months irregular on their mortgage payments. The notice is typically a warning that they will sell your property if you do not make your payments current.

Deed in Lieu of Foreclosure is the alternative to a foreclosure. This is a settlement, which is voluntarily made, and in good faith in which the borrower surrenders their house to the lender and moves on with nothing owed. The main advantage for the borrower is that it immediately releases them from the debt associated with the defaulted loan. The borrower also avoids a painful and time consuming foreclosure. The main advantage for the lender is a reduction in the time and cost of repossessing the property. In most cases a lender will only accept a deed in lieu if there are no other liens attached to the property or these liens can be significantly reduced. The reason is because they do not want to be responsible for the other liens that are attached to the property; this is why most lenders will push for a foreclosure instead because it removes all junior liens.

How does each of the three options affect your credit and the length of time it will take to buy another home?

Short Sale:

This the best option for a homeowner facing foreclosure due to its reduced adverse effects on their credit and their ability to get a loan to buy another home in a shorter period of time.

Short sale credit reporting options are:

• Paid Settlement – In which, credit score will drop 50-150 points.

• Paid, As Agreed – in which, won’t hurt the score at all as long as the borrower is paying regularly.

• Unrated – In which, may drop a few points.

Fannie Mae & Freddie Mac guidelines states that the waiting period before you can buy a new home is 2 years from the date the proceeding is completed. And there is no exception for extenuating circumstances.

Foreclosure:

This is the least advantageous of all of the three options; it will remain in the credit report for 7 years from completion date and the credit score will drop from 50-250 points. Another disadvantage is that when Deficiency Judgment or Tax Lien is filed the credit score may drop an additional 100 points.

Fannie Mae & Freddie Mac guidelines state that the waiting period is 5 years from the date of foreclosure completion proceedings.

Below are requirements in addition to the 5 years up to 7 years after completion date:

• Purchase of a primary or principal residence is permitted, 10% minimum down payment and the minimum credit score is 680.

• Purchase of a second home or property investment is not permitted.

• No cash-out refinance is permitted.

Extenuating circumstances are acceptable such as loss of employment and severe medical crisis and if approved the waiting period is 3 years from the date of foreclosure completion proceeding. The same additional requirements are applied as above except the minimum credit score of 680 is not required.

FHA Guidelines state that the waiting period for a foreclosure is 3 years from the foreclosure completion proceedings. However if foreclosure is a result of extenuating circumstances such as serious illness or death the lender may grant an exception.

Deed in Lieu of Foreclosure:

Credit scores will carry the same serious effects as Foreclosure because most lenders report a deed in lieu of foreclosure as foreclosure. However the reality is that what is reported can actually be negotiate with the lender. It will remain on the credit report for 7 years from settlement completion.

Deed in Lieu credit reporting options:

• Paid Settlement – In which credit scores can drop up to 150 points

• Paid as Agreed- Credit scores show a dropped over 100 points due to default in payment but with this option borrower could purchase a home in a short period of time.

Fannie Mae & Freddie Mac guideline state that the waiting period for a Deed in Lieu of Foreclosure is 4 years from the date of completion proceedings.

Additional requirements after 4 years up to 7 years from completion date:

• Greater than 10% minimum down payment required for the transaction or purchase of investment property, principal residence or a second home by a borrower.

• There is a limited-cash-out and cash-out refinance are permitted if eligible and meet the requirements.

• Extenuating circumstances, physical condition such as medical crisis or other factors such as loss of employment that caused a borrower to choose the option Deed In Lieu of Foreclosure, the waiting period is 2 years from the completion proceedings.

In summary, the guidelines stated above clearly show the advantages for you to choose to short sale your property compared to allowing it to go into foreclosure or deed in lieu because the adverse effects to your credit is reduced and also, you will just have to wait 2 years to get a loan to buy another home instead of 4 years with the deed in lieu option or 5 years with the foreclosure.

Visitors who read this post also read:

• Documents required by lenders in order to begin the Short Sale process
• What is a Short Sale and why you should have one done for you by a Licensed Real Estate Agent
• Townhouse For Sale Bowie Maryland Short Sale 11201 Westport Dr Home

A Short Sale is a type of real estate transaction wherein a homeowner sells their property for less than what they owe the lender. For most lenders to consider a short sale, the homeowner must be experiencing a financial hardship and is unable to make their mortgage payments. Also, the mortgage itself has to be upside down; meaning that the value of the property has dropped and hence there is no equity. The lender takes a loss, and any unsettled balance is usually forgiven. In order to begin the process of negotiating and then approving the short sale, you will need to submit a set of documents required by most lenders. The primary documents are:

• Authorization to Release information. This authorization is an important document because it instructs the lender to discuss your loan with a third party, which in this case is your real estate agent who is helping you navigate the short sale process. The authorization should contain the following data.

a. Name of all the borrowers

b. Social security number of all the borrowers

c. Address of Property

d. Names of lenders/creditors

e. Loan number

f. Signatures of all the borrowers

g. Date

h. Name and contact information of your real estate agent (or whomever you want the lender to release your loan information to)

• Borrowers Financial Statement. This document highlights in detail your assets and liabilities. It is a worksheet that accounts for all your income and expenses. It also should include your co-borrower’s financial information.

• Listing Contract. This is the contract between you and the listing agent. It is needed so the lender can see that your agent has made the effort to expose the property to as many potential buyers as possible in order to received offers by placing it on the Multiple Listing Service (MLS). It also highlights the commission charged by the real estate agent. Agents are often needed in order to speed up the process.

• Purchase and Sale Agreement. This is an agreement that contains the accepted buyer offer. The contract should be legitimate and must be signed by all the owners of the property. A short sale package is considered incomplete without this document. Only packages with a contract that has been signed by both the buyer and the seller should be submitted to lender.

• Borrowers last two pay stubs. You need to include your two most recent pay stubs in the short sale package. This allows the lender to easily determine how much you make and verify your financial hardship. If you are self-employed you can provide a loss and profit report. For unemployed borrower you must present the latest pay stub available.

• Two months of Bank statements. You need to provide your two most recent bank statements. If you have more than one account, all the statements must be made available for the lender to review.

• Last two Tax returns. You need to provide your two most recent yearly tax returns. If you have missed filing your taxes then present the latest available and create a personal note to the lender stating the reasons why.

• Personal hardship letter. This letter must contain your true financial situation and the reasons why you need a short sale. It’s always better to mention in this letter all the steps you had taken previously to avoid having to sell the house, how getting a short sale approved is much better for you than a foreclosure and that you understand that you will not be getting any proceeds from the discounted sale of the property.

• Comparable Market Analysis of value (CMA). This is based on the characteristics of the property being considered, the number of similar properties for sale and so on; it is the estimated current value of the property. Your real estate agent should prepare the CMA and submit it with short sale packet because it helps to give the lender a clear sense of how property values have dropped in your area, hence the need for the short sale. Once the negotiation has begun, the lender will usually order a more detailed CMA a Broker Priced Opinion of value (BPO) from a third party company in order to determine the current value of the property.

The documents listed above are the vital documents needed by most lenders to begin the scalled hort sale process. However each lender might demand additional documents, hence your agent should contact the lender ahead of time and get their list of required short sale documents before submitting the complete short sale package.

VIDEO

Visitors who read this post also read:

• Short Sale VS Foreclosure VS Deed-In-Lieu of Foreclosure; which of these represents the best choice for a homeowner in distress
• What is a Short Sale and why you should have one done for you by a Licensed Real Estate Agent
• Townhouse For Sale Bowie Maryland Short Sale 11201 Westport Dr Home

What is a Short Sale?

A Short Sale is a real estate transaction in which the revenues from the sale fall short of the balance owed on a loan secured by the property sold. Short sales have become the order of the day due to the financial hardships experienced by homeowners whose mortgages are upside down and can no longer make their mortgage payment for one reason or the other. Instead of letting the bank foreclose and ruin their credit, homeowners are now opting to do a short sale.

Who Benefits from a Short Sale?

After a short sale, the home is sold to the buyer and the seller walks away without any cash from the sale; all proceeds go to the lenders and other creditors on title. The main advantage of a short sale to the seller is that he/she can avoid owing the balance of the loan and also get to avoid the long term negative consequences of a foreclosure on their credit.

The buyer’s advantage is clearly the prospects of getting their new home at a significant discount compared to what they might have paid for it a few years back. Buyers should be aware that the short sale process often takes time and are required in most cases to purchase the property as is. In the end, the reward for being patient is a new home at reasonable price.

Mortgage lenders benefit as well, they avoid the cost of a lengthy foreclosure process. Most lenders will agree to a short sale if the seller can prove that they are financially insolvent and also if the lender is made to see that it’s in their best interest to take the discount now instead of taking the property back after a foreclosure and then trying to sell it for less than what they can net right at the moment if they approved the short sale.

The Short Sale Process

The paperwork required can be quite daunting and laborious to put together but if done properly by an expert, the short sale will get approved by the lender in a shorter period of time and surely benefit all parties involved. The short sale process will differ for each lender but in summary it will usually work as follows:

1) Lender is contacted to discuss the possibility of a short sale.

2) The seller gathers all the paperwork that the bank requires and shows proof of financial hardship.

3) Lender reviews the completed package sent in by the seller and then starts the process to verify if it’s in their best interest to accept the short sale offer from the buyer.

4) Then the last phase is the follow up and negotiation phase until the lender approves or denies the short sale.

Hiring a Licensed Real Estate Agent

It is very important to hire an agent to get the short sale approved and find buyers for the house, a real estate professional who can answer your questions and help you steer through the process from the beginning to the end. A Licensed Real Estate Agent also performs their duties with the best interests of the seller in mind because they are bound by certain fiduciary responsibilities and their activities are regulated by the state’s real estate commission.

The foreclosure process can be long, stressful and embarrassing for the borrower. Getting a Short sale approved is the answer and all parties involved end up in a better position at the end of the process than if a foreclosure is completed .The lender automatically gets their money when the sale closes and the homeowner can walk away from the property he/she can’t afford. The buyer ends up buying a good property at a discounted price. Getting a short sale approved can be very difficult and time consuming for someone who is not an expert, if you are considering a short sale, make sure that you hire a Real Estate Agent that is an expert at getting short sales approved by the lender.

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