Many sellers are finding that their homes cannot be sold for enough to cover the mortgage lien on their properties. So they sell “short” by getting the mortgage lender to accept less than what they owe to clear the mortgage debt. Distressed home sales recently accounted for more than one-third of home sales, according to the National Association of REALTORS®. Lenders are already inundated with inventory that is expensive for them to maintain. They want to sell loans, not manage property.
Why would lenders allow a short sale?
Lenders will allow you to sell short if you meet the following criteria:
• Has the home’s market value dropped below what you currently owe on your mortgage, according to recent comparable homes sold in your area?
• Are your payments current? Current payments may not rule out a short sale if other factors are leading to foreclosure.
• Can you show distress? Unemployment, bankruptcy, death or divorce are all hardships the lender will consider.
• Do you have a buyer? Prepare a Net Sheet that shows the sale price you will receive, costs of the sale, unpaid loan balances, outstanding payments and late fees.
• Do you qualify for the Making Home Affordable government refinancing or loan modification program? If you purchased your home before January 1, 2009, and are having trouble making your payments, you could be eligible for modification of your loan’s terms. See: http://www.makinghomeaffordable.gov/modification_eligibility.html
Contact your lender and ask to speak to a decision maker who is authorized to approve your short sale. Provide a statement letter detailing your circumstances such as loss of job, medical problems, or whatever has caused your financial distress. Be willing to supply proof of assets, including recent bank statements, savings accounts, money market accounts, and anything else of tangible value. The lender may want to go back six months or a year to see your credit history. Show the lender your buyer’s purchase offer along with a comparative market analysis from your listing agent.
The key to a successful short sale is to get started on a solution early. Contact your lender for help, before you get behind on your mortgage payments.
Consult our seller resources and contact us with any questions! We are happy to help!
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