What is a Short Sale

Real Estate Agent with Brown & Brown Realty
A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. It is not necessarily about the amount the home is worth but what the owners own on the home which causes them to fall short on their payments due to hardship. In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship. A short sale typically is executed to prevent a home foreclosure. The bank will often allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, this can help avoid foreclosure on their credit history and give them partial control of the monetary deficiency. A short sale is nothing more than negotiating a pay off with lien holders for short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer. In order to have a short sale properly executed, hiring a Realtor that has experience with short sales is a great way to handle this. The borrower will have to complete and prepare the following: Hardship letter - a letter stating why they are in the situation they are in (you will want to state the facts, but the worse off it sounds, the better). This statement of facts describes how you got into this financial bind and makes the plea to the lender to consider the short sale process and accept less than full payment. Proof of Income - the lender will require the two most recent bank statements, last two year’s tax returns, and last two pay stubs (2,2,2). CMA’s - Comparative market analysis- sometimes the market declines and property values fall. If this is part of the reason that you are looking into short sale and cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a comparative market analysis (CMA). Your Realtor can prepare a CMA for you that show prices of similar homes active, pending and sold in the last six months. Authorization- Lender will not disclose any of your personal information without written authorization to do so. You will need to write a letter to your lender allowing your Realtor to have full authorization to discuss this account on your behalf. The letter will need to consist of: Property address Loan number and phone number Your name Date Your Realtor’s name and contact information with a note of you authorizing them to discuss this account and short sale on your behalf In the short sale process, once your Realtor receives an offer, they will present that and the listing agreement along with any and all requested information so that the lender will hopefully accept or counter the offer. Be prepared for the lender to renegotiate commissions. ;)

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