If you decide that a short sale is in your family’s best interest, be prepared to show evidence of the hardship that has created your inability to make your mortgage payments. As part of the required paperwork, your lender will require a written explanation detailing your hardship which 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
Next, your lender will require that your home be listed for sale with a real estate professional. After your home is listing, nothing further happens in the short sale process until there is a buyer under contract to purchase your home.
Your transaction file then will be submitted to your lender and a negotiator who is assigned to handle your file. During the process, the negotiator will make requests for information from the seller that will assist the lender in deciding whether to approve the short sale and at what price.
It is very important that the seller respond promptly to lender requests to keep the approval process moving ahead and the file from being closed. Be prepared to wait 60, 90 or more days to close, depending on your lender’s ability to process files and their program. If the seller has more than one loan, the processing time may be extended because both lenders must agree to the short sale. It is important to know that just as each seller’s situation is unique, not all short sales are the same.
When the lender approves a short sale, the seller will be issued a formal letter of lender approval stipulating the 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. If your transaction is not part of the HAFA program, your outstanding debt amount may not be cancelled. However, many times the bank will settle for a negotiated amount set forth in the form of a promissory note or a re-payment schedule. 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.