'Short sales homes' refers to real estate that is being sold short of what is owed on the mortgage note. When homeowners become delinquent with their loan payments and do not possess the financial means to get back on track, some lenders will allow them to enter into a short sale agreement and stop foreclosure.
Short sales homes are sold below market value to satisfy the loan. The process of obtaining short sale approval is challenging at best. Borrowers are required to provide evidence they are financially insolvent and have no alternative other than selling their home to repay their debt to the mortgage lender.
In order to participate in the short sale program borrowers will work with an assigned loss mitigator. This person is usually an employee of the lender. Their job is to mediate between the borrower and lender to develop a repayment plan or determine if the borrower meets short sale criteria.
Not all banks engage in short sale transactions, nor do all properties or borrowers qualify for approval. Banks do not grant short sale approval when borrowers have accrued equity in their property or when borrowers possess assets which can be used to satisfy the loan. The only way to know what options are available to prevent foreclosure is to contact the lender.
Banks that do allow borrowers to short sale homes must undergo a financial audit. The first step requires submission of a short sale packet which includes financial records such as pay stubs, list of monthly income and expenses, credit card and banking statements, and tax returns.
Some banks require borrowers to have a buyer in place prior to granting approval to short sale the home. Proof of the buyer must be submitted to the lender in the form of a sales contract and realtor agreement.
A few mortgage lenders will allow borrowers to list their short sales home through a realtor and give them time to locate a buyer. This timeframe is usually two to three months. If a buyer cannot be found by the deadline, banks will commence with foreclosure proceedings.
One under-utilized source for locating a buyer to purchase short sales homes is to seek out investors or real estate investment groups. Investors are attracted to short sale properties because they are sold below market value. Real estate investors who participate in house flipping are particularly interested in short sales homes that require repairs or renovations.
Today, many investors and investment groups purchase real estate with cash. Doing so gives them additional negotiating powers because cash sales can be quickly expedited. Locating an investor who buys houses with cash can improve borrowers' chances of obtaining short sale approval.
Financial experts claim that less than 20-percent of short sale requests are approved. Requests are often denied when the borrowers fail to file appropriate paperwork or misses filing deadlines. Short sale denial also occurs when the house or borrower does not meet established criteria of the mortgage lender.
Borrowers should take time to conduct research or consult with a real estate lawyer or short sale specialist to become familiar with all aspects of short sales. The more borrowers know about the process, the better prepared they are to overcome any hurdles that might occur.
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