The biggest oxymoron in real estate today is a short sale. Many short sales can take longer than the average school year to complete. The premise of a short sale is quite simple, the seller is trying to gain the lender(s) approval(s) to move forward with a sale of the property at a net amount less than the amount currently owed. However, just as a buyer has to be qualified to get a loan, a seller in a sense is required to go through a “de-qualification” in many respects. The seller will have to submit bank statements, tax returns, pay stubs, a financial statement and finally a letter of hardship. Short sales can actually take from 45 days to a year to get approved or denied. The factors and decision making steps required in this type of transaction can test the patience of buyers and sellers alike. Many times there is more than one lender involved and every lien holder on the property will need to come to an agreement on their individual terms of the sale or the sale will be held up. Negotiations with each party are relatively independent as most lenders will not speak with each other yet it is common for the lien holder in first position to allow for a set or max amount of closing proceeds to go those lien holders in secondary positions.
Two important points to keep in mind. All sellers should consult an attorney and accountant to understand their full liability and long term exposure. Also, the underlying lender isn’t always the investor of the loan and they, the investor, have the ultimate say in the approval or disapproval of the sale. Many times the mortgage insurance, timelines for write-offs and numerous other factors can provide reasons why a lender opts for a full foreclosure instead of a short sale even if the short sale nets the lender more money from our limited view.
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