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The Short Sale Process In A Nutshell
Monday, July 26, 2010
A short sale is when a buyer makes an offer to the loan holder for alesser amount than what is owed. This is often done on homes that are inpre-foreclosure or are already bank owned. As an example, a homeowner owes 300kon the mortgage. A purchaser offers the bank 220k for the home as the finalprice. The lender than can accept or negotiate with the buyer.
To begin the process the holder of the mortgage must call the note holder andrequest a short sale package. This package of paperwork represents each stepboth buyer and seller must take to complete a short sale.
The mortgage company may request a hardship package from the owner. Thispackage will include financial statements, tax receipts and affidavits from thecurrent owners as to why they can no longer fulfill their obligations on thehome.
It is advised that this paperwork is returned immediately because processing onthe lenders end can take several weeks.
The purchaser will need to provide the mortgage holder with proof that they canpay for the house immediately at the time of sale. This can be done withsecuring another mortgage or with cash. Either way, if the lender approves theymust be paid in full.
A Brokers Price Opinion (BPO) must be completed on the home. This is where a certified realtor must come and evaluate the home for what it is worth on thecurrent market. The lower the market value in comparison to the money owed, themore likely the lender will agree to the short sale.
Once the evaluation has been completed and all the paperwork submitted both buyer and seller must wait for approval from the lender. At times, the lendermay counteroffer the buyer, but in the current market conditions this is rare.
When all negotiations are completed and paperwork signed, the house transfersover to the new buyer. Short sales can take anywhere from 1-4 months tocomplete. The time line will depend on how quickly paperwork and evaluationsare completed and how fat the lender moves on the issue. Short sales should bean early consideration when a property is starting to become distressed. Ashort sale can prevent foreclosure and other legal proceedings.