Real Estate Short Sale
Real estate short sale refers to a type of agreement offered through mortgage lenders to borrowers who are facing foreclosure. The term 'short sale' means lenders agree to accept less than the full balance owed on the home loan. While this option can offer homeowners financial relief, short selling might not be the most viable option.
Obtaining approval for real estate short sale can be a painstaking process. Lenders are not required to offer the option to short sale properties, nor is it available to all borrowers. Homeowners who have already entered into the foreclosure phase are ineligible for short selling. Borrowers who have accrued equity or possess financial portfolios or investments that could be sold to cure mortgage arrears will not qualify for the short sale process.
In order to initiate the real estate short sale process, borrowers must contact their lender's loss mitigation department. Loss mitigators act as mediators between borrowers and lenders to negotiate options and keep financial loss to a minimum for the bank.
With the massive influx of foreclosures, bank loss mitigators are often overworked. It can take several weeks before borrowers receive a return phone call from their lender. Instead of allowing the home loan account to fall further behind, borrowers must be persistent in contacting their lender.
If borrowers are unable to speak directly to the loss mitigation department, they should send a letter explaining their situation and requesting the option to short sell their property. Written correspondence should be sent via certified mail with a return receipt request.
Banks establish short sale protocol, so the process may differ depending on the lender. However, most require borrowers to submit a short sale packet which includes financial documents, tax returns, employment pay records, list of income and expenses, and a short sale hardship letter outlining events which caused them to become delinquent on their mortgage loan.
Most banks require borrowers to have a buyer in place before granting short sale approval. In some instances, lenders will grant borrowers' time to list their home as short sale property through a realtor.
Real estate agents usually are not eager to engage in short sale real estate transactions because they must reduce their commission in order to expedite the sale. Short sale homes require additional paperwork and can be a cumbersome process. Locating a realtor willing to list and expedite the sale of short sale properties can be challenging.
Negotiating short sale real estate transactions can be intimidating for borrowers who aren't familiar with real estate jargon and legal contracts. When possible it is best to work with a real estate lawyer or short sale specialist. Although this can create additional expenses, hiring professionals to negotiate on your behalf can potentially save thousands of dollars in the long run.
One very important aspect of the real estate short sale process is to understand the type of short sale agreement offered through the lender. Banks are in business to make money and those who grant short sale approval often enter a deficiency judgment against borrowers for the difference between the sale price and loan balance.
Some mortgage lenders will accept the sale price as payment in full; allowing borrowers to walk away from their property without owing additional funds. When banks submit short sale deficiency judgments, borrowers are held responsible for the difference. Deficiency judgments remain on borrowers' credit reports until paid in full. Lenders can persue borrowers through court ordered wage garnishment up to 20 years after the transaction.
If you are facing foreclosure, we encourage you to review our short sale real estate article library to learn about the advantages and disadvantages of short selling.
If you have received short sale approval and need a buyer for your property, or if you require assistance negotiating with your lender, submit information about your property via the 'we buy houses' form. Upon receipt of your information, Simon Volkov will contact you to discuss available options.