How to Short Sale
Loan modifications are a good choice for individuals who have the financial means to cure mortgage arrearages and remain current with their payments. However, when borrowers face life-altering events that prevent them from being able to repay their mortgage, lenders will sometimes engage in short sales.
Two types of short sales exist - Payment in Full without Pursuit of Deficiency and Deficiency Judgment. The latter should be avoided at all costs. What this means is the bank holds the borrower responsible for the difference between the sale price and balance due on the loan. This can amount to several thousand dollars.
Payment in full means the lender accepts the sale price and will not persue the borrower for the difference. Obviously, this is the best scenario. Payment in full allows borrowers to walk away from their property without owing additional money. They lose all the money they paid toward the home and cannot receive any of the sale proceeds, but are freed from their financial bondage.
I'm going to be honest with you. Obtaining short sale approval is no easy feat. If you plan to embark on this path, it is imperative to become educated about the pros and cons. The most important lesson in learning how to short sale is to realize the process takes time. While response times vary between lenders, it usually takes four weeks to two months to receive a response from the bank.
Between the financial meltdown and decline in housing prices, banks are overwhelmed with short sale requests. Some lenders report receiving as many as 500 short sale requests in one day! It is not uncommon for the process to take four to six months to complete.
Multiple steps are involved with short selling. The first requires obtaining authorization from your lender. You must contact your lender and speak with your loss mitigator. If your lender engages in short sales, you will be required to submit a short sale packet.
The packet must include substantial financial documentation to prove you are financially insolvent. Remember, you are asking the bank to accept less money than you owe. If they are going to take a loss on the property, they want evidence that proves you do not own any assets that could be used to settle the debt.
Borrowers will be required to obtain a broker price opinion (BPO) or property appraisal. BPOs are a tool used by mortgage lenders to obtain property appraisals. However, BPOs are not the same as a traditional property appraisal. BPOs are less expensive and frequently used to determine the value of distressed properties.
Two types of broker price opinions are available - Drive-By (external) and Internal BPO. Drive-by is exactly what it sounds like. A real estate broker drives by the home to gather information about the property and the area where it is located. Internal BPOs require the broker to enter the home to take measurements and make note of visible damage.
The BPO is a critical element in the short sale process. The document allows the borrower to list everything that is wrong with the home. It is important to include a list of other foreclosure, bank owned, or abandoned properties in the area. Doing so can help negotiate a lower sale price.
Most banks require short sale real estate to be listed through a realtor. The BPO is provided to the realtor who then uses the information to establish a listing price.
Some lenders require borrowers to have a buyer lined up before granting short sale approval. Others allow the borrower a certain period of time to sell the property. Regardless of your lender's policies one thing is certain - you do not have much time to close the deal. If you cannot locate a buyer, the lender will commence with foreclosure action.
At Simon Volkov, we specialize in helping distressed homeowners learn how to short sale their property. We are currently accepting a limited number of borrowers who need to sell their house quickly. Learn more about our unique program by submitting information about your property via the "we buy houses" form.
There is no fee or further obligation. We will review your information and contact you to further discuss your situation. Everything is held in the strictest confidence. If you are ready to remove the heavy burden you're carrying around, contact us today.