One fundamental part of constructing a short sale is the process of putting together a complete short sale packet. It can be a daunting process until you learn it, but after some practice, the short sale becomes a smoother process.
Here are the basics of the complete short sale packet:
1) Don't assume the paperwork is the same from lender to lender. Almost all lenders have different paperwork requirements, so your first step would be to contact the lender you are hoping to do business with and find out what is required for a short sale. Be aware that most of the time, in order to even get this information from the lender; you will have to present them with a signed Letter of Authorization from the homeowner.
2) Have the homeowner compose a letter of hardship, which details to the lender exactly why they have fallen behind on payments and why they can no longer continue to pay the mortgage on the property. They will also need to enclose two months of bank statements and pay stubs, along with tax returns for the previous two years.
3) You will then need to draw up a purchase and sale agreement, proving to the lender that homeowner does wish to sell you their home.
4) Next, you'll fill out a financial form indicating the financial situation of you, the borrower. Basically, you will have to disclose to the lender how much money you make each month, as well as give a breakdown of your complete monthly expenses, from housing, gas, groceries and entertainment.
5) You'll also want to compile a "comp sheet," comparing this house to other comparable properties, to prove that the price you are willing to pay is fair. This should also include any estimates from contractors you've spoken to about repairs on the property.
6) Finally, the lender will also want to see a HUD1, or a "net sheet" as well.
After these paperwork requirements are complete, you'll then be able to move into a more active negotiation phase with the lender.
Although, as noted earlier, different lenders have different requirements, these are some of the more basic steps in the short sale process, but for investors who are looking to have more free time to deal with their investment properties, a new trend has arrived in the form of short sale outsourcing.
A good outsourcing company can make the job easier because they already have the contacts and relationships at various lenders, and can close a short sale faster. Outsourcing your short sale is an excellent way to step away from the stress of negotiating short sales and have a team of investing experts working on your behalf to get you the properties you want.
There are not many ?ways out?, once you are in a tight spot as a home owner, who's going through some financial problems and finding it hard to reimburse the debt amount to his/her lender or mortgagee. Most of the times, you are left with no other options but to withdraw from your home ownership, either by means of foreclosure or ?short sale?. A short sale occurs when you sell your home (of course with the consent of the lender) to some buyer at a price that's less than the owed amount of debt. In case of a short sale, lenders keep the money, buyers get the home and the sellers are left with ? well, nothing but at least they can save themselves from dishonor and bad credit record that comes with foreclosures or bankruptcy.
Mostly, three major stakeholders are involved in a short sale, namely seller, buyer and lender. Let's discuss the transaction one by one, from their standpoint.
Seller: Though seller gets nothing (of a monetary value) out of ?short sale?, still he/she is the one who is the most concerned. As a seller, you should keep some points in mind. First, the lender will not always absolve you of the remaining debt. Second, the credit history doesn't really remain unmarked in case of short sale (though the bad impact is less than the foreclosure). As a seller, you must put forward a very strong case for the bank's loss mitigation department, an application providing valid reasons with documented proofs (especially if you have cited the "decline in property prices" as the reason for short sale).
Lender: Lender is of the paramount importance in a short sale, buyers and sellers cannot proceed with the deal without the lender's permission (In case there are more than one lenders involved, consent from both parties will be needed). Mostly lending banks permit sellers to carry on with the short sale to save all the costs and complications attached with foreclosures, but not before going through a thorough checking and verification process.
Buyer: Homes at short sale notices are typically low-priced (not lesser than foreclosures though). But the biggest drawback in going for a piece of "short sale property" is the amount of time it can take before the deal is finalized, mainly because it's not the seller but lender who'll approve or disapprove the offer. As a buyer, it makes sense to involve a real estate agent, who has previously dealt with short sales. Short sale homes are supposed to be in better condition than the foreclosed ones, but you must hire a home inspector to do the inspection in any case.
Both Mike Mccoy & Williamking are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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