Short Sales

What is a Short Sale?

A short sale is an agreement between a seller and their lender(s) to accept a sale price thats less than the amount they owe on their property.

Can anybody short sale their property?

Yes, if they qualify. It is common practice for the lender(s) to require the homeowner to prove they have suffered a financial hardship that prevents them from being able to meet their obligation. Most lenders have a loss mitigation department that evaluates the short sale request for approval. The process typically includes a review of your specific situation and an independant valuation of the property by obtaining a appraisal or Broker Price Opinion. You should be prepared to provide the following items:

Letter of Authorization - If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving them permission to talk with the specific parties about your loan.

Hardship Letter - This statement of facts describes how you got into a financial bind and makes a plea to the lender to accept less than full payment.

Proof of Income and Assets - Lenders want to verify your inability to meet your obligation.

Copies of Bank Statements - If your bank statements reflect unidentified large deposits or withdrawals, you shuld be prepared to explain these items.

Purchase & listing Agreement - The lender will want a copy of both agreements

Settlement Statement - The lender will require a breakdown of all costs and fees associated with the transaction in order to determine how much you are requesting them to discount the lien(s).

Why would someone consider a short sale?

A short sale is often used as an alternative to foreclosure, which mitigates additional fees and costs to both the lender(s) and homeowner. If you are facing foreclosure, it is far more likely that you will find yourself in a position to buy another home quicker with a short sale on your credit report versus a foreclosure.

Are there risks associated with a short sale?

Yes. Aside from the negative impact a short sale may have on your credit report, you need to be aware of any potential tax or deficiency issues. You need to obtain up to date information from multiple professionals, including an accountant, an attorney, and a real estate broker. If you are the buyer, you should use the inspection period wisely and leave no stone unturned.

Should I consider buying a short sale?

Buyers may get a great property at a discount if they are willing to be patient with the process and prepared to do some work on the property.

Copyright 2011 The Property Doctor. All rights reserved. (602) 758-3388 - The data used to create The Property Doctor is obtained from public and professional resources. The Property Doctor and its associates expressly disclaim and make no representations or warranties of any kind, whether express, implied or statutory, as to the accuracy of the data used or the merchantability or fitness for any particular purpose.