“What is a Short Sale and Steps to do the process”
A short sale is a real estate transaction where the homeowner sells their property for less than the amount owed on their mortgage. It is a way for homeowners to avoid foreclosure and the negative impact it can have on their credit score. In a short sale, the lender agrees to accept less than what is owed on the mortgage, which can help the homeowner avoid a deficiency judgment and move on from the property.
The short sale process can be complicated and time-consuming, but with the right guidance and preparation, it can be a successful way to avoid foreclosure. Here are the steps to follow to do the short sale process:
Step 1: Determine If You Qualify for a Short Sale
The first step in the short sale process is to determine if you qualify for one. A short sale may be an option if:
• You owe more on your mortgage than your home is worth.
• You have experienced a hardship, such as a job loss, divorce, or medical emergency, that has made it difficult for you to make your mortgage payments.
• You are unable to refinance or modify your mortgage to make your payments more affordable.
If you meet these criteria, a short sale may be a viable option for you.
Step 2: Find a Real Estate Agent with Short Sale Experience
The next step is to find a real estate agent with experience in short sales. It is important to work with an agent who understands the short sale process and can guide you through it. The right agent will be able to help you price your home appropriately, market it effectively, and negotiate with your lender on your behalf.
Step 3: Prepare Your Short Sale Package
Before you can begin the short sale process, you will need to prepare a short sale package for your lender. This package should include:
• A hardship letter explaining why you are unable to make your mortgage payments.
• Proof of income, including pay stubs, tax returns, and bank statements.
• A financial statement outlining your income and expenses.
• A listing agreement with your real estate agent.
• An appraisal or comparative market analysis (CMA) showing the value of your home.
Your real estate agent can help you prepare this package and submit it to your lender.
Step 4: Market Your Home
Once your short sale package is prepared and submitted to your lender, it is time to market your home. Your agent will list your home for sale and begin marketing it to potential buyers. It is important to price your home appropriately to attract buyers and generate interest.
Step 5: Accept an Offer
When a potential buyer makes an offer on your home, you will need to review it with your agent and decide whether to accept it. Keep in mind that the lender will need to approve the offer as well, so it is important to choose an offer that is realistic and reasonable.
Step 6: Negotiate with Your Lender
Once you have accepted an offer, your agent will begin negotiating with your lender on your behalf. Your lender will need to approve the short sale and agree to accept less than what is owed on the mortgage. This can be a lengthy and complicated process, but your agent will be there to guide you through it.
Step 7: Close the Sale
Once your lender has approved the short sale, it is time to close the sale. Your agent will work with the buyer and their agent to schedule a closing date and coordinate the transfer of ownership. At the closing, you will sign the necessary paperwork and hand over the keys to the new owner.
In conclusion, a short sale can be a viable option for homeowners who are struggling to make their mortgage payments and want to avoid foreclosure. The key to a successful short sale is to work with an experienced real estate agent who can guide you through the process and help you negotiate with your lender
First is to make a short sale offer with a strong earnest money deposit amounting to 1% up to 3% the sales price. It speaks volumes that the buyer is serious about the sale. The minimum down payment for FHA loans is 3.5% of the purchase price and the earnest money is part of that down payment.
The second is to agree to put it into a trust account. It just shows that the buyers are really committed to the transaction because some of the real estate contracts call for the earnest money deposit to be placed into a trust account upon short sale approval. Sellers will most likely want to see that buyers put their money where their mouths are.
The third is to check the comparable sales in the market. Although some short sale listings are deliberately priced under the market value to attract buyers, many banks will only approve short sale that is priced between 5% and 10% under market value. So to save time find those who are reasonably priced under the market.
Fourth, before making an offer, call first the short sale listing agent. The agent must have received several offers and your offer may need to be priced much higher than the list price. Verify that he hasn’t accepted and already sent an offer to the bank or else you may be wasting your time.