What Is A Short Sale Exactly?
A short sale takes place when a homeowner under financial distress has to sell their home, but for less than the amount still owed on the mortgage. For this reason, the mortgage lender will need to approve a short sale before anything else can be done.
The buyer will usually be a third party, which is not the bank, and the revenue of the sale will go to the lender. In this case, the lender will either excuse the borrower from paying the difference between the price the house was sold for and the actual value of the mortgage, or the lender can get a deficiency judgment against him or her. This means that the borrower will be required to pay back the difference in full, or at least part of it, minus the closing costs and other costs that were incurred during the selling process of the property.
This situation may seem harsh on the seller of the home, but in fact, doing a short sale is much more beneficial to the seller than being foreclosed on, as the financial repercussions tend to be far less severe. Short sales are also far less damaging to the borrower’s credit rating than a foreclosure would be.
How Can The Short Sale Process Begin?
Before the process can begin, the lender of the mortgage, which will most likely be a bank, will have to sign off on the agreement to go ahead with the short sale. This agreement is also known as a pre-foreclosure sale.
First things first, the lender will need documentation from the seller, a short-sale proposal, explaining exactly why the short sale is the best option given the particular situation before any decision can be made. Without lender approval, the short sale cannot legally be executed.
Accordingly, the financial trouble and reason for proposing a short sale of the property must be something new that is preventing the borrower from keeping up with the required payments. These may include unexpected health problems, divorce or loss of a job.
To put yourself in a more favorable and convincing position in the eyes of the lender, you might consider eliminating any non-essential purchases. If you spend money on items that are clearly not necessary in meeting your basic needs, you will risk looking irresponsible to the lender when they consider your proposal.
It is important to know beforehand, however, that the short sale process does involve a lot of paperwork, and can easily take up to a year before everything can be finalized for the sale of the property.
Clearly, a short sale is a very labor-intensive and time-consuming process for the homeowner, but the payoff is ultimately worth all the extra work and inconvenience involved.
It must also be kept in mind that the lender will most likely lose a lot more on a short sale than on a foreclosure. So, really try to be considerate of this fact when writing your proposal to the lender.
This is undoubtedly a very difficult situation for any homeowner, but our team at Reddtrow Properties are here to assist you!
Contact us today! We will handle everything for you every step of the way during this process.