No homeowner wants to face a foreclosure. However, certain things may happen that could result in your failure to make the monthly mortgage payments and plunge you into the distressing prospect of losing your home. Instead of going through the lengthy and dreaded foreclosure process, you can do a short sale on your home in Charlotte NC.
A short sale is a transaction where the bank allows the delinquent homeowner to sell the home for less than what is owed. To do this, the homeowner finds an agent and puts the house on the market. If the home gets sold, all the proceeds from the sale go to the lender. This saves the homeowner the expense of a foreclosure suit.
If you are considering doing a short sale on your Charlotte NC home, you need to understand how the short sale process works and connect with the right short sale agent.
Understanding a short sale
The term short sale means that the home is being sold for less than the remaining balance on the mortgage. The lender can either forgive the difference or get a deficiency judgment against the borrower. This will require the borrower to pay the lender all or part of the difference between the sale price and the original mortgage value.
The lender or the bank agrees to a short sale in order to recoup a portion of the mortgage loan owed to them. This kind of transaction tends to take some time. It also involves intensive paperwork. However, going through the short sale process is a better option than a foreclosure. This is because short sales are not as damaging to one’s credit rating as a foreclosure.
Doing a short sale in Charlotte NC
A short sale is like a traditional home sale, for the most part. The home seller gets in touch with a real estate agent and informs them that they would like to sell their property. Then they wait for potential buyers to start making offers.
However, unlike a typical home sale, the seller needs to submit a short sale offer to their mortgage lender for approval. The bank or the lender must be on board with the transaction because they will be trying to recoup as much of the original loan as possible.
Here are 6 steps in doing a short sale:
1. Getting a Property Valuation Analysis
If you are thinking of doing a short sale, one of the first things that you have to do is to establish the value of your home. Your lender won’t likely approve your application if there is enough equity in the home to sell and at least break even if it foreclosed instead.
It is important to prove that you are upside-down on your loan. That means you owe more on the mortgage compared to the property’s fair market value.
The lender will want documentary proof of the home’s value. You can ask your real estate agent to prepare a comparative market analysis (CPA). You can also work with a professional appraiser. Just keep in mind that the lender might request one of its own too. This is one of the reasons why you need to work with a real estate agent who knows the Charlotte NC market like the back of her hand..
2. Demonstrating financial hardship and providing documents
Before agreeing to a short sale, your lender will also need to know why you must sell the home. This is where the hardship letter comes in.
In your hardship letter, you have to prove to the lender that you are no longer capable of making the monthly mortgage payments. You also have to show beyond doubt that you do not have any assets that would allow you to catch up on payments. You also have to show that the hardship you are experiencing isn’t likely to be resolved in the near future.
Hardships that qualify for a short sale usually include any of the following:
- Death of a spouse
- Separation or divorce
- Loss of a job
- Job transfer
- Reduction in pay or work hours
- Medical expenses from a serious illness
- An adjustable interest rate reset
- Military service, or
- Natural disaster.
When you write the hardship letter, avoid including anything that would hurt your case. While throwing in a little emotion isn’t prohibited, remember to keep your letter to one page. Make sure to include documents that will prove the statement in your hardship letter.
These may include:
- Authorization to release information
- Your financial statement
- Listing contract
- Purchase and sale agreement
- Your last two pay stubs
- Two months of bank statements
- Two most recent tax returns
- Comparative Market Analysis (CMA) of value
The hardship letter should be convincing and detailed because it is one of the most important elements of the short sale approval process. The seller must immediately understand that you are in a position where the only options are a short sale, a foreclosure, or a bankruptcy.
3. Contacting the lender for a short sale application
Get in touch with your lender about putting your home up for sale as a short sale property. Make sure that your home is eligible through your lender’s standards. You also need to discuss the amount your lender is willing to accept for a short sale offer.
Just keep in mind that lenders are not too keen on short sales. You might have to keep after them and make multiple follow-ups to get the application and move forward.
4. Reaching out to a short sale agent
If you think you qualify to sell your home via a short sale, you need to get in touch with a real estate agent who specializes in short sales. You need a Certified Short Sale Seller like myself to deal with this complex transaction.
My name is Nancy Braun and I’m your designated Certified Short Sale Seller (CSSS) in Charlotte, NC. My expertise and experience will help you make the right decisions and will also guarantee a fresh start for you that is mortgage-free.
I can verify if you make a good candidate for a short sale. Through your letter of authorization, I can contact your lender on your behalf, help you prepare your home for sale, and list your house at the low end of fair market value.
5. Preparing the sales contract and submitting the documents
Once you have an interested buyer, the next step is to prepare the sales contract. However, this is subject to the lender’s approval. It is not considered final until then even if both the seller and the buyer agree on the terms.
The sales contract should clearly indicate that the deal is contingent upon the lender's approval. You can also include a copy of the listing agreement and proof of the buyer’s ability to purchase.
The lender will review the contract. They could approve the offer. They could also reject it. Sometimes, lenders reject the offer but outline which terms they would agree.
There are also cases when lenders don’t respond at all. It's acceptable to keep following up until you get an outright rejection or at least some type of definitive response.
6. Negotiating the short sale and going to closing
Once you have the lender’s response, you need to show the contract to the potential buyer. The buyer can choose to accept or reject the lender’s terms.
If the contract is approved, the short sale closes. The property will be transferred to the buyer. The lender will receive all the proceeds from the sale of the home. Then, the original owner will be released from their mortgage loan.
Although doing a short sale on your home may not be an ideal situation, you’ll have more control over the situation. You will also put yourself in a better position to recover faster.
If you need help arranging a short sale or you need more information about the process, call me, Nancy Braun, at 704-997-3794! I will help you sell your home in Charlotte, NC.
In case you cannot view this video here, please click the link below to view How to do a short sale in Charlotte NC? on my YouTube channel: https://www.youtube.com/watch?v=8ZcUjpm2qFg&feature=youtu.be