Short Sales - Part I

For current, up-to-date and relevent information on Short Sales and Foreclosures... please visit my website:

http://drewludlow.com/default.asp_Q_f_E_cpg_A_pg_E_ShortSales

The information I posted below is out-of-date.

Thank you!
-Drew Ludlow

===========================================================

What Is A Short Sale?
A "short sale" is the sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. For owners who can no longer afford to keep mortgage payments current, the short sale is an alternative to bankruptcy or foreclosure proceedings. When lenders agree to a short sale in real estate, it means the lender is accepting less than the total amount due. Not all lenders will accept short sales or discounted payoffs, but, by accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes.
Before considering a short sale, sellers are always advised to seek sound advice from an attorney and/or CPA. Once the legal and tax consequences of a short sale are understood, it is imperative to contact a real estate professional immediately. A Realtor who is trained in obtaining short payoffs will be able to lead a seller through the long process of gathering information, submitting the short sale request, listing the home and procuring a bona fide offer to purchase so that the seller can escape the stigma of a foreclosure on his/her credit report.

For The Seller
The short sale process is a very long and lengthy one. It could take anywhere from 30-120 days to complete. If you are a seller in default of your mortgage and you are considering a short sale, the time to speak with a Real Estate professional is on day one. Too often, people wait until the last minute, hoping for a miracle to happen. It never does.
One reason that the process takes so long is that there is a plethora of materials and documentation to gather, before and during the short sale process. Some of these items include:
* A signed copy of the listing agreement with your Realtor.
* A signed copy of a sales contract with all addenda and attachments.
* A commitment letter from your Buyer.
* A written hardship letter stating the circumstances for your missed payments and default.
* Your last two bank statements (checking and savings)
* Your last two paycheck stubs
* A HUD-1 settlement statement (net sheet) indicating the allocation of all sale proceeds.
* Your two most recent state and federal tax returns
* Your most recent summary satements for any 401k, retirement or investment accounts

Once all these items are assembled, your Realtor or agent will then submit them to the lender for review. It is at this point that the waiting begins. The lender must then perform their own due dilligence, some of which may include:
* Re-assembling the materials you just submitted.
* Sending them down the line to the department head for further review.
* Sending them once more to yet another department head.
* Submitting them to their board.
* More red tape.
* Performing a BPO (Broker Price Opinion) to determine the fair market value of the home.
* Losing all the documents your Realtor submitted.
* Reassembling them again.
* More red tape.
* Counter-offer.

If everything goes well, the lender may approve your short sale and you will be free to complete the sale of your home to a Buyer at a lesser amount than what is owed.

(Don't Miss Short Sales - Part II) Coming Next!