While there are many short sale listings popping up on the MLS and other sites the truth of the matter is that most realtors do not know much if anything about short sales. Many clients/sellers think that this is the "SOLUTION" to their real estate problems. The fact is that many of us (realtors/brokers) fail to give them an indepth explanation of the process because we are ill equipped to do so due to our lack of experience or knowledge in "SHORT SALES."
As a realtor/mortgage broker I have some information to share with brokers, sellers and buyers alike regarding the process and options one may exercise in short sales.
It is evident by today's alarming rates of foreclosures that property owners are experiencing temporary or financial problems that lead to their default in their mortgage payments. There are several options that may be utilized. First of all, the property should be listed with a broker for a minimum of 90 days at the listing price of the current fair market value. Secondly, the property owner must sign a release form allowing the broker to contact his/her lender.
When contacting the bank/lender you should contact the Loss Mitigation department or the special forebearance department or other foreclosure prevention alternatives. Each lender ( most I find to be standard) will have their own loss mitigation options which may be available to resolve delinquencies and possibly avoid foreclosure.
Here is a brief description of these options:
1. REPAYMENT PLAN: For those property owners who have experienced a temporary loss of income or increase in expenses and now have sufficient income to make payments.
2. LOAN MODIFICATION: ( ONE OF THE HARDEST TO ATTAIN IN MY HUMBLE OPINION): An option for those who are unable to make temporary increased monthly payments but yet can still afford their mortgage payments.
3. SHORT SALE: The lender may accept less than a full payoff when the value of the property has declined. The property must be listed at fair market value and all offers must be forwaded to the lender along with estimated closing costs. I advise to work closely with a title company that will submit the HUD directly to the lender. All offers are subject to approval by the lender.
4. DEED IN LIEU OF FORECLOSURE: A deed in lieu voluntarily gives back the Deed to the lender to sastify the debt and avoid foreclosure. The property must be on the market for a minimum of 90 days at fair market value.
Please note that the collection efforts on behalf of the lender do not hault during any of the above options and payments are still due while the loss mitigation officer evaluates that case by case situation.
I hope this short summary on the process of SHORT SALES has helped you in some way.