SELLING YOUR HOME AS A SHORT SALE

In my last article we discussed two other options of how to stop foreclosure. They are bringing the loan current (reinstatement) & doing a loan workout (forebearance plan). Now we are going to get into how a short sale works & the benefits it provides for a homeowner.

In a short sale, the lender agrees to discount or “forgive” a certain amount of a loan balance, due to an economic or financial hardship of a homeowner. There are a number of different situations that influence whether or not a lender will discount a loan balance. The main circumstances are related to the homeowner’s financial standing, but the lender will also consider the current real estate market too.

The process starts by gathering what is commonly referred to as a short sale package. This package is required by lenders to prove that the homeowner can no longer afford the loan on their property. That is why a good portion of the documents in the short sale package are the same docs needed for a loan approval when buying a home. Things such as two recent pay stubs, two months of bank statements & last two years of Federal tax returns.

This package is sent to the bank, which the bank takes & assigns to its loss mitigation department. If the bank comes to the conclusion that they will lose less money by doing a short sale vs going through with the full foreclosure process, then the short sale will be approved. This all takes place within the loss mitigation department, usually.

For the homeowner the advantages of agreeing to do a short sale include:

· Avoiding having a foreclosure on their credit report

· You will be eligible, under Fannie Mae guidelines, to buy another home in 2 years instead of 5 years(with a foreclosure on your record)

· Control over negotiating away the bank’s right to seek a deficiency judgment

The last point concerning a deficiency judgment is a very useful plus of a short sale. Being able to negotiate with the lender to have them remove their right to seek a deficiency against the homeowner will truly allow the homeowner to move forward without the worry of a judgment in their future.

Doing a short sale is one more way to stop foreclosure & help homeowner’s move on with their lives. In Charlotte, NC we have found it to be a very effective tool in the present real estate market, where many seller’s are upside down with their mortgages. In my next article we will take a look at two more effective ways to stop foreclosure.