Short Sale Approval
Short sale approval can be a long and complicated process. In essence, when lenders engage in this type of real estate transaction they agree to accept less than is owed on the mortgage note. There are many steps involved, along with a trail of paperwork.
In order to obtain short sale approval, you will be required to contact your lender's Loss Mitigation Department. Typically, a Loss Mitigator is assigned to your account and will review your situation to determine if you are eligible for a short sale.
Short sale eligibility requirements include:
1) The Borrower will be required to provide proof their home is currently worth less than the unpaid balance. This can be accomplished by obtaining comparable homes sales in the area where your home is located. Comparable home sales reports can be obtained from Realtors or via the Internet.
2) The mortgage note must be in default. Additionally, most lenders will only consider short sales when you do not have any equity in your home. If you have equity or other financial assets, chances are high your lender will not approve your request.
3) The homeowner must provide proof they are facing financial distress due to hardships such as extended unemployment, chronic or emergency health problems, bankruptcy, death or divorce.
4) The homeowner has no assets they can draw from to maintain mortgage payments.
More often than not, your lender will offer you a variety of options prior to granting short sale approval. These might include a Loan Modification or Deed in Lieu of Foreclosure. It is crucial for you to review the pros and cons of all options offered prior to deciding to sell your home.
Once the decision has been made to pursue a short sale, certain elements must be in place. Generally, the lender will require the homeowner to have a Buyer lined up. This is best accomplished by working with a Realtor qualified to handle short sale transactions.
Finally, a short sale package must be provided to the lender. Although requirements vary from lender to lender, most require the following:
• Detailed financial statement which clearly outlines income and expenses
• Short sale hardship letter which explains the events that caused you to fall behind in your mortgage payments
• Bank and investment statements
• Current year tax return
• Realtor listing agreement
• Signed sales contract
• Estimate settlement statement (HUD-1)
• Proof of buyer's financing
The short sale process is not for the faint of heart. However, it is far less damaging to your credit and less traumatic than the foreclosure process. It is highly recommended to thoroughly educate your self about the process and work with qualified individuals who are well-versed in short sales. These include Realtors, Real Estate Attorneys, Short Sale Specialists and Private Investors who are experienced in this type of real estate transaction.
Published on May 11, 2008 at 08:22 PM