If you are considering selling your Long Island home as a short sale, there is certain information you will need to have. A short sale is one where the net proceeds from the sale won't cover your total mortgage obligation and closing costs, and you don't have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it. Here are some tips and strategies for homeowners that may be facing a short sale.
1. Hire a qualified team. Qualified being the most important rule. The first step to a short sale is to hire a qualified real estate professional and a real estate attorney who specialize in short sales. Interview at least three candidates for each and look for prior short-sale experience. Short sales have sky-rocketed just in the last few years, so it may be more difficult to find practitioners who have closed a lot of short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won't try to take advantage of your situation or pressure you to do something that isn't in your best interest. Rule of thumb: A qualified real estate professional should:
- Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).
- Help you set an appropriate listing price for your home, market the home, and get it sold in a reasonable amount of time.
- Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (The Long Island MLS permits and requires that the short-sale status be disclosed to potential buyers).
- Ease the process of working with your lender or lenders.
- Negotiate the contract with the buyers.
- Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval. You can't sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.
Ask your potential realtor if he/she will provide these services when you speak with them initially. If they are not willing to do so then keep shopping! Try to fond an attorney who is recommended or has an association with a reputable organization.
2. Gather documentation before any offers come in. Your lender will give your attorney a list of documents required to consider a short sale. The short-sale "package" that accompanies any offer typically must include:
- A hardship letter detailing your financial situation and why you need the short sale
- A copy of the purchase contract and listing agreement
- Proof of your income and assets
- Copies of your federal income tax returns for the past two years
- Recent paystubs and bank statements
3. Prepare buyers for a lengthy waiting period. Even if you're well organized and have all the documents in place, be prepared for a long process. Waiting for your lender's review of the short-sale package on average can take several months.
- If you have only one mortgage, the review can take about two months.
- With a first and second mortgage with the same lender, the review can take about three months.
- With two or more mortgages with different lenders, it can take four months or longer.
When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender's loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)
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