Monday, July 25, 2011


A short sale is one of the common alternatives used to avoid a foreclosure. It can be an advantage to a homeowner facing foreclosure and who desires to avoid having a foreclosure on a credit record. Short sales are exactly what the term sounds like. When a home is sold for less than what is owed on it the difference between the amount the home sells for and the mortgage loan amount on the home is called a short sale. Thus, if a home's mortgage amount is $400,000 but is sold in a short sale for $200,000 the amount short is $200,000.Getting approval from a lender involves a process of filling out certain documentation and submitting it to the bank or lender's loss mitigation department for consideration and approval of the short sale. It is the bank that has the final say over whether the short sale is approved rather than the homeowner who is selling the property.

The first decision that should be made by a homeowner considering a short sale is whether a short sale is the best solution? If the homeowner simply wants to walk away from the home a deed in lieu of foreclosure may work better. The homeowner simply deeds the property back to the bank. In many cases the bank, in return for a deed in lieu of foreclosure, will pay the homeowner money called "cash for keys". This process allows the bank to avoid substantial fees and costs that would be involved in a foreclosure and provides the homeowner with money that can be used to assist with moving expenses or to begin to rebuild a financial standing. Follow the guidelines below in order to obtain the best results, if a short sale is determined to be the best solution in resolving a foreclosure problem.

1.GET THE BANK OR LENDER'S SHORT SALE PACKAGE.This can be done by simply going to the lender's website and finding it's criteria for submitting a short sale package. Download the package and fill it out. If the homeowner will be represented by a real estate agent, this function and the rest of the steps in this article will generally be handled by the real estate agent. If the homeowner chooses representation by a real estate agent, the homeowner should ensure that the agent is experienced in handling short sales.

2.SHORT SALE DOCUMENTATION.The short sale package should contain at minimum an authorization to release information authorizing the real estate agent to represent and speak on behalf of the homeowner; a completed financial statement, copies of the homeowner's last two years tax returns; the most recent two months bank deposit statements and a hardship letter written by the homeowner that clearly and accurately explains the homeowners' hardship circumstances that justify an approval for a short sale.Without hardship circumstances justifying a hardship it is unlikely the lender will be motivated to approve a short sale. The bank also generally requires the homeowner to submit an IRS Form 4506T which permits the bank to obtain copies of past tax returns. These documents generally make up the short sale package. Some banks or lenders may require additional documents in which case they should simply be provided.

3. MAKE THE SHORT SALE PACKAGE ATTRACTIVE FOR MAXIMUM RESULTS!Presentation of the short sale package is an important step. Appearance and perception of the package is crucial. The package should be submitted with a cover letter requesting short sale consideration with a table of contents and tabs separating the various documents. This presents a professional appearance and is helpful to the negotiator assigned to review the package and to determine whether to recommend approval or declination of the short sale.Take care to make the negotiator's job as easy as possible and not have to search for information within the package. Tabulation serves this purpose well and will be appreciated by the negotiator.Although not always required, it is also a good idea to wait until there is a bona fide offer from a qualified buyer before submitting the short sale package. The offer should also be accompanied with a HUD-1 statement also. A HUD-1 statement will show the bank what it can likely expect to receive as a final amount resulting in a short sale.An experienced real estate agent will know what to do in submitting these documents. If the homeowner chooses to handle it personally, help should be sought directly from an escrow company or closing agent who will usually be glad to assist in preparation of the HUD-1 in return for the fees in closing or handling the escrow.

4.ESTABLISHING AND MAINTAINING RAPPORT WITH THE SHORT SALE NEGOTIATOR.Once the short sale package is submitted to the bank's loss mitigation department a negotiator will be assigned. It is important to establish a good relationship with this person because the success or failure of the short sale rides on an approval recommendation from the negotiator.Be courteous and professional at all times and provide additional documentation when requested so long as it is reasonable and it makes sense. Most negotiators are professional and courteous and will be helpful when they perceive the same from the homeowner's side.

5.CLOSING THE DEAL AND WALKING AWAY.If all goes well the short sale will be approved. The homeowner will be able to walk away without a foreclosure on the record and to commence rebuilding a favorable financial record.

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