What is a short Sale? A short sale is when a hardship occurs and the home sells for less than the amount owed plus the selling expenses. There are various causes of hardship including but not limited to: payment increase or mortgage adjustment, loss of a job, death of a spouse, divorce or separation, too much debt, reduction of income, and or failure to sell for what the home is worth. In order to avoid foreclosure many homeowners are turning to their real estate agents to short sale their home. There are many steps involved in this lengthy process, as laid out below.
The first step in a short sale is finding a qualified agent that has experience in this area of real estate. Not someone who has done one or two in the past few years, but one who is up to date on the trends, laws and expectations of the banks. If you have a real estate agent who you have worked with and they aren't familiar with the process, see if they have someone if their office who does, and have them co-list the home. If an agent doesn't know what they are doing, then the chances of them successfully closing your short sale drop dramatically.
Once you have an agent picked, you both will go through the necessary documents needed for submission to your mortgagor(s). If you have one mortgage, the process is easier than if you have two or three, but regardless the same information will be sent to all lien holders. You will need to provide the following documents to your real estate agent: a signed authorization for them to represent you and negotiate on your behalf, a written hardship letter, your last two bank statements from all checking and savings accounts, last two paystubs, most recent 401k statement, name of mortgage company and account numbers for all mortgages on the property. At this time you will also sign a listing agreement with your agent for them to list your home. Since you are selling as a short sale, and the buyer will have to wait longer than a traditional sale, the price is lowered to reflect this inconvenience. But keep in mind as a short sale seller, you typically don't pay anything towards the sale of your home, unless negotiated with the bank at the end of the process.
After collecting the necessary documents and paperwork, your real estate agent will list your home for sale and start submitting your documents to your mortgage holders. Most mortgage companies do not like to get documents until an offer comes in, but some take them up front. Keep in mind you need to have your home in show condition and work hard to get an offer or offers on your home to submit. De clutter, stage the home, fresh paint, etc.
Once an offer comes in, your agent will meet with you to go over the details and sign the offer for submission to the bank. Behind the scenes your agent will be working with the title company to get together an HUD-1 to submit with the offer. This document allows the bank to see a fairly exact number of what they will be netting on the sale. Your agent will submit the entire offer along with the HUD-1 to all mortgage and lien holders for approval. The wait now begins!
After an offer is submitted to the bank your agent will work to negotiate it through. There is a lot of behind the scenes work that goes into this stage of a short sale. The banks may have to pay off a second and third mortgage, tax liens, etc. All which play a role in the amount of time it takes to get their decision. This can range from a few weeks to 6-9 months! Once a decision is made the bank comes back and does one of three things: accepts the offer as is, counter offers the buyer, or rejects it all together. They may also do some negotiating with the homeowner in terms of promissory notes, bringing cash to closing etc.
After all parties agree to the terms the offer now has final acceptance and can move forward to closing! Congratulations you have just sold your home!
Although this is generally what happens in the short sale process, it is not a guarantee. Every single short sale is different and has its own set of issues. Some move through quickly to acceptance, while others are never accepted at all. Thus it is so very important to work with a knowledgeable and experienced agent, who will walk you through the process step by step the entire way.
Overall a short sale may not be the way one wanted to go, but if there is hardship and the homeowner needs to sell, then this may be the best route to take. Hopefully the above information will be helpful in making that decision.
Rachel Scarrella Edina Realty 651-246-3210 http://www.RachelScarrella.com http://shortsalemn.blogspot.com/
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