This is a great summary of the short sale process that may help you if you are facing a short sale. I agree with every thing here, especially the part about patience. That is what you will need the most of if you are facing a short sale.
1 Reason Short Sales are Difficult
- Because the payback of the loan will be ‘shorted’ by a significant amount and the lender will have to take a loss, your lender must approve the Short Sale before the house can close.
2 Reasons to Consider a Short Sale
- Helps you avoid foreclosure.
- Allows you to sell an upside-down house without incurring insurmountable debt.
3 Requirements to Get a Short Sale Approved
- You owe more on your loan than your house is worth.
- You can’t keep up with loan payments due to unemployment, relocation, divorce, medical expenses, or other financial hardship.
- You have no other choice but to sell and move on.
4 Short Sale Complications
- Your bank may counter the contracted price with a higher price.
- Your bank may drag out the Short Sale process.
- Your bank may require a cash contribution or promissory note from you.
- The buyer may back out of the contract.
5 Negative Impacts of a Short Sale
- You may have to pay income tax on the forgiven loan amount. Be sure to consult a tax expert.
- The approval letter may hold you liable for the loan deficiency (forgiven portion of loan). Be sure to consult an attorney.
- You won’t be able to purchase another house for 2 years.
- Your credit rating will be affected.
- You’ll lose the investment you made in your house.
6 Short Sale Benefits
- Allows you to sell your house and start over.
- Helps you avoid foreclosure.
- Completely eliminates or substantially reduces your financial liability.
- Minimizes damage to your credit rating.
- Lets you to purchase another house in 2 years.
- Allows you to take care of the problem responsibly.
7 Documents Your Bank Needs to Approve the Short Sale
- Letter of authorization that lets your real agent speak with the bank on your behalf
- Personal financial statement
- Letter explaining hardship circumstances
- 2 years of tax returns
- 2 years of W-2 forms
- Most recent 2 months of payroll stubs
- Most recent 2 months of bank statements
8 Qualifying Hardship Demonstrating Your Need for a Short Sale
- Unemployment or reduced income
- Divorce or marriage
- Illness or disability
- Job transfer or relocation due to personal reasons
- Negative cash flow on investment property
- Other changes in family, personal or financial circumstances
9 Services Your Real Agent Should Provide
- Counsel you on the Short Sale process.
- Provide full marketing support.
- Set up a pricing strategy that will get a contract within 30 days.
- Help you prepare necessary paperwork.
- Help you compose the hardship letter.
- Transmit all documentation to your bank.
- Keep in weekly contact with your bank and report back on process.
- Transmit instructions to the bank on your behalf.
- Coordinate closing of sale.
10 Requirements for a Strong Short Sale Contract
- Negotiated price should be within 90% of the current market value.
- No seller-paid closing costs.
- No FHA or VA financing.
- Earnest money deposit should be at least 1% of purchase price.
- Signed as-is contract including right to inspect.
- Contingency for 3rd party approvals.
- Time period allowed for bank approval should be at least 4 months.
- Contingency for homeowner’s approval of bank terms.
- Backup contracts allowed.
- Accompanied by the buyer’s mortgage loan pre-approval.
11 Steps to Short Sale Success
- Prepare your house for showing.
- Put your house on the market.
- Show your house in usual manner.
- Let your agent apply pricing strategy based on showing activity.
- Negotiate a strong contract.
- Prepare Short Sale Package for submission to bank.
- Let your agent follow up with lender on regular basis.
- Keep cool, collected and patient.
- Obtain written approval from lender.
- Close on sale of house.
- Start over with clean ‘financial’ bill of health.
For more information about doing a Short Sale, please visit Chicago Short Sales.
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JUDY CHAPMAN | What can I do for you?
Glenview ∙ Northbrook ∙ Prospect Heights ∙ Surrounding Areas
Residential Sales ∙ Residential Rentals ∙ Short Sales
Koenig & Strey | 1925 Cherry Lane | Northbrook, IL 60062
Judy@JudyChapman.net | Office: (847) 521-4111
© 2007-2011 www.activerain.com/blogs/NorthShoreChicago by Judy Chapman. ALL RIGHTS RESERVED. Portions of this content may be used with attribution. The information contained in this blog is the author’s own opinion and does not reflect the opinions of Koenig & Strey Real Living.