Short Sales information for sellers
Prepared by John Lippincott
For owners who can no longer afford to keep mortgage payments current, there are other options to bankruptcy or foreclosure. One of those alternatives is called a “short sale.”
A short sale in real estate means that the lender is accepting less than the total amount owed to release an existing mortgage. Not all lenders accept a short sale nor do all sellers or properties qualify for a short sale.
It is very important to work with a Realtor such as myself who has experience in doing short sales. I am a CDPE, Certified Distressed Property Expert and know what is needed to complete the short sale process. You must be patient, diligent, organized, and persistent. But when all parties collaborate, it can be beneficial to all involved.
Lenders have varying requirements and will ask the seller to submit a wide variety of documentation. If you are considering a short sale here are some suggestions:
Contact the Lender:
Make several phone calls until you find the right person who is the decision maker regarding short sales within the financial institution.
Hardship Letter:
State the facts how you got into your financial bind and make a plea to the lender to accept less than what is owed. Lenders may be sympathetic if you lost your job, were hospitalized, or had a death in the family. You will need to have supporting documentation such as medical bills, death certificate, divorce decree, etc. However, lenders will not consider any dishonesty or criminal activities.
Letter of Authorization:
During a short sale you may be working with a Realtor, lawyer, title company or closing agent. You will receive better cooperation from the lender if you write a letter giving them permission to talk to those specific interested parties about your loan. The letter should include: The date, your name, property address, loan number, and all parties involved with their names and contact information.
Proof of Income and Assets:
It is best to be truthful and honest about your financial status and disclose all and any assets. Start to gather your Tax Returns (last 2 years) and Bank Statements (last 3 months). List all assets such as other real estate, bonds, cash, savings accounts, and anything of tangible value.
Preliminary HUD 1 Statement:
This is an estimated closing statement that shows the sales price you expect to receive, all the costs of the sale, unpaid loan balances, past due payments, late fees, and real estate commissions. Have your attorney prepare this estimate of closing costs in the form of a HUD 1.
Comparative Market Analysis:
Sometimes markets decline and property values fall. If this is part of the reason you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender by a CMA (Comparative Market Analysis). Your Realtor can prepare a CMA for you which will show comparable property values.
Purchase Agreement & Listing Agreement:
When you reach an agreement to sell to a potential buyer, the lender will want a copy of the offer and a copy of your listing agreement. It is very important that the offer has no financing contingencies and contains all the required addendums. Make the best and strongest offer possible.
Package: It is very important to send a complete package with seller/buyer information to the lender. Missing information will delay the process. Remember, there are multi-levels of approvals and conditions are usually required. Keep in mind that lenders are overwhelmed and review thousands of files. They will only consider packages that are well put together and are likely to close
John Lippincott is a REALTOR® with
A Licensed Real Estate Brokerage.
