Homeowners who can’t afford to stay in their houses are turning to short sales. Not only does it let them sell an underwater property for less than principal, but it helps them avoid the financial and psychological impact of foreclosure. From a buyer’s perspective, the short sale has become the path into a home that may have been out of their reach just a couple years ago. Lenders and the federal government have worked to streamline the short sale process, effecting more successful – and timely – transactions.
If a short sale may be in your future, giving thought to these questions will help simplify the process:
- What’s your bank’s timeline? Speaking with your lender about the potential for a short sale before you’re in foreclosure saves stress and worry over paperwork and documentation. It also helps to ensure a potential buyer will have financing and can close in time.
- Which lender(s) own the lien(s)? After significant consolidation in the financial industry, this may be easier said than done. Start by asking the loan servicer(s) – the company who you send payments to. Don’t forget lines of credit and second mortgages (and, if applicable, thirds)!
- What is the property’s value? Review the bank’s valuation against current comps. Don’t hesitate to ask them to review if there’s a significant difference between the two.
- Do you have the required documentation? Typically, you’ll need a Letter of Authorization (allowing agents to speak on the seller’s behalf), Listing Agreement, Purchase Contract, Short Sale Agreement, HUD Estimate, Lender Approval(s), as well as pay stubs, tax returns, and bank statements. If the buyer or seller qualifies for assistance from either a lender or the federal government, additional documentation may be required as well.
- Do you plan to vacate the home before the short sale closes? Oftentimes, a lender require the property to be owner-occupied until after the short sale has closed.
A successful short sale can go a long way to making life better for sellers and buyers. By mapping out the path to success early on, you can cut down or eliminate hurdles altogether.