The thought of losing your home can bring feelings of anxiety, depression and loss of self- esteem.   We’re here to say, do not give up! It is very important to handle the problem promptly and directly to avoid devastating outcomes.

If it’s clear your mortgage is no longer affordable, or you have already missed mortgage payments and your lender has begun procedures to repossess your home, it does not mean that you’re out of time or options.  A short sale may be your best solution. Here are steps to take in preparation:

• Organize your personal and financial documents. Gather everything your lender will need ahead of time. Whatever option you choose, the process can be expedited by having all the documentation ready and organized. Although each lender has its own forms and requirements, the following is a typical lender request:

• Checking account statements
  
• Recent mortgage statements
  
• Savings account statements
  
• Last 2 months’ paycheck stubs for all wage earners
  
• Past 2 years’ tax returns for all filers
  
• Be prepared to describe the hardship that is causing your mortgage to be unaffordable

 

Hardships can arise from a variety of situations; and may include one or more of the following:

• Adjustable rate mortgage reset
• Illness
• Lost or reduced employment income
• Medical bills
• Death
• Relocation to new employment
• Death of a spouse or co-borrower
• Divorce
• Marital separation
• Military duty
• Incarceration

 

Important:  During the short sale process, you will need to keep your lender updated monthly by submitting checking and savings account statements and employment income pay stubs.

Contact your lender. Your lender does not want to take your home back; the bank is in the money lending business – not home ownership. Be sure to discuss appropriate solutions with your lender representative, and then share that information with your real estate agent, attorney and tax counselor.

Contact a real estate agent.  Your lender will require that your home be listed for sale with a licensed, real estate professional. Be sure to choose a professional who has short sale training and CDPE certification, and is knowledgeable on the current market conditions.   After your home is listed, the next step begins when a buyer is secured for your home. NOTE:  Beware of so-called rescue scams or mediators that promise a quick resolution to a pending foreclosure for an upfront fee, which is illegal. Reputable counselors do not guarantee that a foreclosure can be stopped, under any circumstances. A knowledgeable real estate agent, especially one with CDPE training (certified distressed property expert), should be able to guide you through the process.

After a contract to purchase is in place, your transaction file will be submitted to your lender for processing.  A negotiator will be assigned to handle your case. Be aware that throughout the process, the negotiator will continue to require updated financial information from you to assist the lender in approving your short sale application and determining a sales price. It is very important that you respond promptly to lender requests to keep the approval process moving and your file from being closed. Be prepared to wait approximately 4 months to close, depending on your lender’s ability to process files, their program and the number of loans you have.  If there is a mortgage insurer or more than one loan, the processing time will be extended because each party behind the loan must agree to the short sale price and terms.  It is important to know that just as each seller’s personal situation is unique, every short sale is different.
The lender will conduct its own market research by requesting Broker Price Opinions to determine a sales price that meets their financial requirements. At this point, negotiations may continue between the lender and the buyer to achieve a sales price that is acceptable to both parties.

When agreement is reached, the seller will receive a formal letter of lender approval stipulating the price, terms and conditions under which the short sale has been granted. You as the seller must agree to these terms before a closing can take place.  One of the lender’s stipulations is that no proceeds will be distributed at closing to the seller.  If the sale takes place under a program that permits a seller incentive, be aware that this amount will be considered taxable income to the seller.

Before making any decision in regard to the lender’s short sale approval, we suggest consulting with your attorney and financial advisor to determine the best choice for your family.

If you are interested in learning more about a short sale, we can provide you with access to current, factual data that is normally available only to real estate agents and industry insiders. We are here to guide you through this difficult time – with experience and respect. For those who may be interested in purchasing distressed properties, we can provide a host of listings for you to consider.