How The Real Estate Short Sale Process Works
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By Simon Volkov
Real estate short sale agreements have been offered for years, but have only become popular since the banking crisis occurred. Lenders sometimes enter into short sale contracts to avoid the expense of foreclosure. In essence, banks allow borrowers to sell their house for less than owed on the mortgage note.
The real estate short sale process can take several months to complete. The first step involves providing financial records to an assigned bank loss mitigator to determine if borrowers and their property are eligible for short selling. Borrowers must be in serious financial distress and cannot own valuable assets which could be sold to satisfy the loan balance.
Bank loss mitigators are responsible for many facets of mortgage default. They often handle loan deferments, loan modifications, real estate forbearance, mortgage refinance, deed in lieu of foreclosure, foreclosure, and short sale transactions.
One of the biggest frustrations borrowers face is the length of time it can take to make direct contact with lenders. However, borrowers must be persistent in their efforts to obtain a successful outcome. If necessary, send a certified letter with a return receipt request which requires lenders to sign the receipt to acknowledge they received documents.
Short sales are handled differently by each lender. Some banks require borrowers to have a qualified buyer in place before granting short sale approval. Others grant borrowers’ time to list their home for sale through a realtor. In rare instances, mortgage lenders allow borrowers to list the property as for sale by owner.
Locating a realtor to list short sale property can sometimes be challenging. Agents can be required to reduce commission rates to expedite quick sale of the home. In addition to reduced commissions, real estate short sales require additional paperwork to document the sale.
It is the responsibility of the mortgagor to understand lender requirements. Those who aren’t comfortable going through the short sale process on their own should consult with a real estate lawyer or short sale specialist. Private real estate investors can be a good source as well. Many investors have negotiated with banks to purchase short sale real estate as investment property.
Most banks require borrowers to be a minimum of 31 days delinquent before discussing the option to short sell. Property owners with accrued home equity normally do not qualify for real estate short sales. However, if extenuating circumstances surround the borrower’s ability to pay future loan payments, lenders may consider this option.
Individuals who have recently lost their spouse to death or divorce, or borrowers enduring chronic or terminal health issues might be granted short sale approval. Much depends on the policies of the lender. Borrowers facing these types of problems should talk with their lender to determine available options.
Mortgagors must determine the type of short sale offered by their lender. Most banks hold borrowers responsible for deficiency amounts between the sale price and loan balance. Once the property is sold banks can demand payment in full.
If borrowers cannot pay the deficiency in full, banks can obtain court ordered deficiency judgments. If borrowers do not establish a payment plan to pay the deficiency amount, banks can garnish wages until the debt is fully paid.
The goal of real estate short sales is to obtain a payment in full agreement. This option lets borrowers walk away from the property without owing additional funds. However, short sales are reflected in credit reports as foreclosure and debtors will witness a reduction in credit scores. Debtors should immediately engage in credit repair strategies to offset the blemish of short selling.
About the Author: Real estate investor, Simon Volkov shares insider-secrets for improving chances of obtaining real estate short sale approval in his popular book, Short Sale Hardship Letter eBook Course. Order your copy today at ShortSaleHardshipLetter.com.
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