Short Sale

Short Sale -  where the home owner sells the property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes in full satisfaction of the debt. The lender would have the right to approve or disapprove of a proposed sale. Many banks are willing to take a loss in a short sale avoiding an even bigger loss in a foreclosure. Some short sales leave a deficiency balance for which the seller is still liable. Short sales are rising sharply. Many homeowners are currently underwater, many of them are owners of the deluxe homes. The buyers can have a great deal on a short sale. But it is a complicated and time consuming process that can take between two and six months, in some cases up to one year.

What you should know as a short sale buyer:

- You will be dealing with three parties: the seller, his real estate agent and his lender.

- Find the experienced real estate agent who works on short sales. Don’t go without him. It will be a pain in the neck.

- Find a mortgage broker and obtain a pre-qualification letter.

- Avoid homes where the seller has other offers or/and more than one mortgage. It will increase the amount of time negotiation takes, and less chance for a short sale approval. 

- Find out the  rules of the seller’s lender. Many of them can ask you to sign a sales contract, to get a pre-approval for your mortgage, etc.

-  Ask your agent to search comparable sales in the area and determine the home’s fair market value. Make your offer lower than that. Your agent will help you to set the right price.

- The seller’s agent will submit a completed package along with your offer to the seller’s lender. This package can include the seller’s Hardship Letter, Employment / Income Verification, Bank Statements, Financial Evaluation Form , IRS Tax Returns, Settlement Statement or HUD 1, Broker’s Price Opinion, etc.

- Don’t do an appraisal or inspection of the property until the offer is approved. Try not to put down more than $1,000 before the approval unless the seller’s lender requires you to make a bigger deposit along with the contract.

- When the bank finally sends its counter offer, you have a chance to send yours if you can prove the declining market value.

- Once you have the lender’s approval, obtain your mortgage.