I have had many agents and mortgage professionals tell me that the lenders will not consider allowing a seller who is "upside down" on their mortgage to sell their home with a short sale unless they have stopped making their mortgage payments, some well intending agents will tell this to their distressed home sellers, IT IS NOT TRUE! The best time to list the house as a "short sale" is as soon as the seller realizes that they can't afford to sell it any other way because they owe more than the market value of the home and can show that they have a financial hardship. DO NOT wait until they are in default because then you are limiting the time that you have to get the house sold and as the mortgage and taxes and other fees are not paid, the amount owed on the house will only grow and make the problem even worse. My most recent short sale was on a house where the very intelligent seller contacted me that she felt that she can no longer afford the payments of her home and that she needed to sell it, she also recently had her income reduced so she could prove to the bank that she met the "financial hardship" criteria required by the banks for short sale approval. We listed the house and had our first offer within a week, I was able to get thru to the negotiator immediately with our offer and explained that she was not in default but will be unable to pay her bill the following month. The negotiator's reaction was "lets get it sold as fast as possible." They worked with me on getting an appraisal done within 1 week after my request. That buyer ended up backing out and buying a less expensive home, however right now 3, weeks later I have two good offers on the table and call the negotiator directly, she gave me her private line. The banks appreciate a quick sale BEFORE the mortgage bills, Homeowners Association Fees and taxes start adding up even more from the missed payments. My point is that if you have a seller in trouble, put the house on the market as soon as possible as a short sale, have the seller complete a short sale package available from the lender and a letter that gives you the right to negotiate and get an offer as soon as possible with which you then include the "hardship package" which you present to the bank as a short sale. Also provide any comps that you can find to support that the offer is a decent offer so that the bank will order the appraisal "BPO". GOOD LUCK and help many.
Sounds like it is a good idea with some as long as the lenders are reasonable.
great post! this part of the industry continues to change, rapidly. A few short months ago that was not the case - lenders were in denial about the number of homes they'd actually be acquiring. They are also now under serious scrutiny from the Feds, which is changing their tunes a lot. Everyone - keep these posts current and share your TODAY experiences - as I said this is changing rapidly.
Each lender looks at the owners financial situation differently. Some lenders won't consider a short sale without the owners being behind on their payments and others will accept the package knowing that the owner is in financial distress but keeping up with their payments. Check with the loss mitigation department of the lender you are working with before you accept a short sale with current payments.
Thanks to all of those who responded. The fact is that just recently the lenders are indeed becoming more realistic about the declining real estate prices and are attempting to move a bit quicker than even 3 months ago. I think that the explosion in the amount of foreclosures in many states such as mine in California is motivating them to consider taking greater net financial losses in approving the short sales and in allowing people to sell their homes, earlier, prior to default.
Lauren - I am glad we do not have the market conditions here in Ontario, Canada that you have to deal with in various parts of U.S.
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