Jimena Paridee

Steps of a Short Sale

Sometimes, to avoid going through the costs of foreclosure, a lender will sanction a short sale by letting a buyer purchase the home for less than the mortgage balance while the home is in pre-foreclosure stage.  A pre-foreclosure stage is one of the three stages of foreclosures.  Here are some of the steps of a short sale.

• Seller signs a listing agreement with a real estate agent subject to a short sale with third-party approval.
• The agent finds a buyer who makes an offer for less than the amount of the mortgage.
• Seller accepts the buyer’s purchase offer.
• Seller’s lender accepts the buyer’s purchase offer.
• Transaction closes when the buyer delivers the funds, the lender releases the lien and the seller delivers the deed.

Qualifications for a Short Sale

Before you eagerly climb aboard the short sale bandwagon, consider the following to determine whether you may qualify for short sale.  If you cannot answer yes to all four requirements, you may not qualify for a short sale.

• The Home’s Market Value Has Dropped.

Hard comparable sales must substantiate that the home is worth less than the unpaid balance due the lender.  This unpaid balance may include a prepayment penalty.

• The Mortgage is in or Near Default Status.

It used to be that lenders would not consider a short sale if the payments were current, but that is no longer the case.  Realizing that other factors contribute to a potential default, many lenders are eager to head off future problems at the pass.

• The Seller Has Fallen on Hard Times.

The seller must submit a letter of hardship that explains why the seller cannot pay the difference due upon sale, including why the seller has or will stop making the monthly payments.

A few examples that do NOT constitute a hardship are:

• Bad purchase decisions.  Blowing your paycheck on a home theater system with surround sound does not qualify as a hardship.
• Unhappy with neighbors.  Even if every home on your block has lost its curb appeal, that will not qualify you as a hardship.
• Buying another home.  The lender will not care if you decide the home is not suitable for you or your family.
• Pregnancy.  Increasing the size of your family or starting a family is not considered a hardship.
• Moving into an apartment.  If you decide to move out of your home that is a lifestyle decision and not a very good reason to abandon your home. 

Examples of Hardship are:

·         Unemployment

·         Divorce

·         Medical Emergency/Sudden Illness

·         Bankruptcy

·         Job Transfer