A short sale hardship letter is perhaps the most important letter any homeowner will ever write. The letter of hardship allows borrowers to present the circumstances that caused them to become delinquent on their mortgage note.

When writing a short sale hardship letter, it is important to remember the letter will be read by a human being. Banks employ loss mitigators to work as mediators between borrowers and lenders. Although loss mitigators do not make the decision to approve or disapprove a short sale request, they do have considerable input.

The words and emotions expressed within the hardship letter can sway the loss mitigator to help borrowers obtain short sale approval. This is not to say homeowners should fabricate misfortunes. In fact, people who lie in order to obtain short sale authorization could be charged with a criminal offense.

It’s always a good idea to draft an outline of the letter of hardship. Most people find they need to write this letter several times before obtaining their final version. Start by creating a timeline of the events which led to your inability to pay the mortgage. Then, write out a detailed description of these events and how they affected you.

Keep in mind that banks don’t like losing money. Many people believe a short sale means they can sell their home for any price they want and write-off the remainder of their mortgage balance. Most banks only allow borrowers to list their real estate at around 10-percent under market value and require the sale be facilitated through a licensed realtor.

The following is a sample short sale hardship letter. While each lender requires their own format, this will give you an idea of what banks are looking for.

Dear Lender,

We are contacting you today to request short sale approval for our property located at 1212 Sunny Lane. Unfortunately, we have fallen on hard times and are no longer able to meet our mortgage obligation.

We purchased our home in March 2006. At the time, I was employed as a construction supervisor and my wife operated a licensed daycare center from our home. In April 2007, I was involved in a car accident and had to undergo multiple surgeries. I was unable to return to work on a full-time basis for over a year.

In August 2007, my wife was diagnosed with breast cancer. Due to her treatments and hospitalization, she had to close the daycare. This caused us to lose over $2500 in income each month.

In December 2007, the company I worked for went out of business. Not only did we lose my income, we also lost our health insurance. We were unable to find an insurance provider who would pay for my wife’s treatments because they were considered pre-existing.

Although we were able to obtain some financial assistance through the hospital, we had depleted our savings account by June 2008. My wife has recently been able to reopen the daycare, but at this time she is only able to care for three children. Currently, she brings in $900 per month.

My unemployment benefits run out in June of this year. I have yet to find fulltime employment, but work odd jobs when I am able to find them. Our combined monthly income is around $1700. Considering our house payment is $1450 per month, I believe you can see why we are unable to cure our arrearages and become current.

We sold my wife’s car and my motorcycle so we could continue paying for medical treatments. We have enrolled in budget billing through our utility company and eliminated extra features on our phone and cable. We shop at discount grocery stores and utilize coupons whenever possible. We do not go out for dinner, go to movies, or engage in frivolous spending habits. However, we simply do not earn enough to make ends meet.

Obtaining short sale approval would eliminate a tremendous amount of stress and allow my wife to focus on improving her health. We greatly appreciate the opportunity to participate in a short sale and thank you for taking time to review our situation.

Sincerely,

John and Jane Doe

If you are delinquent on your mortgage and feel a short sale would benefit you, you must contact your lender to discuss this option. Not all banks engage in short sales; nor are they required by law to authorize this type of real transaction. Therefore, it is crucial to be respectful and not lose your temper when talking to the loss mitigator handling your case.

Once a short sale is authorized, you must work closely with your lender and provide requested documents in a timely fashion. Even more important, you must learn how to write a hardship letter that is compelling, factual and concise. Doing so can greatly increase your chances of success and potentially free you from your mortgage loan debt.

A real estate short sale situation may be right when a homeowner is in foreclosure and the loan amount is close to the value of the home. The seller cannot sell the house with an agent because the fees involved exceed any moneys received from the sale. What can you do?

If you own a house and are late on your payments, you might want to learn more about short sales and if a short sale is right for your situation. Banks will consider a short sale in lieu of getting the home back. The bank takes less than what is owed on the loan.

An example would be, if you owe say $300,000 dollars on your home and you are facing foreclosure the bank might take $225,000 dollars and you’re off the hook for the balance. Bank will consider a short sale because if the bank continues to foreclose they most likely will get the house back - and that’s bad news for a bank. They will then have to hire a real estate agent, make any necessary repairs, wait several months in hopes of getting an offer, that, they still might lose money on the process. It’s far simpler for a bank to sell the property to a cash home buyer and cut their losses. The most beneficial point to a short sale is that the seller does not have a foreclosure on their credit report, just a loan adjustment.

A key component to all short sales is that the owner(s) need to be completely up side down and was victim of some kind of a hardship - out of the ordinary event that caused the default; such as illness, accident, loss of job, etc.

Sometimes the only way you can sell a house and protect your credit is through a short sale. It allows you to sell your house really fast, gets you out of the loan responsibility and you can go on with your life. You almost always need a cash buyer/investor to handle the process correctly, ensuring a successful transaction. Banks want you to use an investor because they want to close out the loan as soon as possible.

Explanation of a short sale A short sale occurs when a lender agrees t accept less that the amount owed to payoff a loan as an alternative to foreclosure. If the property is worth less than the amount owed on the loan, then even if the lender forecloses and takes back the property, they know they are going to take a loss. We can often convince the lender that they will benefit better if they take less than what is owned now rather than taking the property back by foreclosure and trying to sell it later.

Typical Time Frame The short sale negotiation process is a lengthy one. It may take several weeks or more likely several months to get an approval. Lenders have several layers of bureaucracy, insurers, and investors that we will have to maneuver through in order to get a short sale approved. So it is important to be patient during this long process.

My House if going to foreclosure, it there enough time? Not always. Just staring a short sale won’t automatically stop a foreclosure. However, many times an experienced short sale negotiation service; such as TheShortSaleHouse.com, or seasoned agent can convince a lender to stop the foreclosure to let them attempt to negotiate a short sale. So, while there are no guarantees, it does not hurt to try.

How long can I stay in the house? The key word is short sale is sale. The purpose of a short sale is to get the property sold. So you will need to move. We aren’t a program that can stop a foreclosure and allow you to keep the house indefinitely. It will be easier to sell a house if it is vacant, so you should make plans to move as soon as possible,

How do I know this will work? You really don’t. No one should make any promises to you that this will work, Once you missed a payment, the lender is in charge and can proceed to foreclosure if they want to. But you know they don’t want to and the negotiator should be very good at presenting alternatives to the lender that they often want to accept rather than foreclose. They should be very good at what they do, but NO PROMISES are being made as to where or not the lender will accept a short sale - every lender is different.

How much money will I get? You can’t get any money. A universal requirement of lenders in granting a short sale is that the borrower will not get any proceeds from the sale of the property. The lender is going to take a loss on your loan - they are not going to let you get any money. If you have something of value, the buyer may be willing to buy that item separate of this short sale.

What happens is this does not work? Your house will likely go to foreclosure. A short sale is something you should try after you exhausted all your other options.

What is a “RELEASE?” A lender may offer to ‘release’ its security interest against the property in exchange for less than the total amount of the note. A release will allow the property to be sold without paying off the obligations of the note. However, the note is not satisfied.

Advantages: This successful short sale will allow the property to be sold and thus avoid a foreclosure.

Disadvantages: The remaining debt on the property (sometimes called a ‘deficiency’) still exists. You are still liable for the note - in other words - you still owe the money.

Reality: It is not likely that the lender will pursue the deficiency unless you have other significant assets, and if you don’t try a short sale and the property goes to foreclosure, you are going to have a deficiency anyways.

What is a “satisfaction?” A lender may agree to accept less than it is owed as complete and total satisfaction of the note and release its lien against the property.

Advantages: Your note and obligation to the lender are satisfied for less than you owe. When the property is sold, the debt is paid off completely.

Disadvantages: You may have some tax consequences that you should discuss with your tax adviser since the lender is making money you owe disappear. Sometimes our negotiations are successful in obtaining satisfaction. Sometimes all the negotiator can get is a release.

The lender will require review of financial package that usually includes: two months bank statements, two months pay stubs, two years most recent IRS tax returns, and other common information. The leading cause of delay and even denial of our offer to the lender is caused by the seller failing to deliver these items in a timely manner.

How to edit a blog entry on a “Real Estate Road Kill” Wordpress Licensee site.

Do you owe more than what your home is worth? Are you behind on payments and feel that you can’t afford your home anymore? Do you think that you wouldn’t be able to pay a Realtor to sell your home due to not having enough equity? These are all symptoms of being “upside down” in your home. In simple terms, your loan amount is higher than the current market value of your home. You may want to consider negotiating an Arizona short sale.

So what can be done with a situation like this in Phoenix or Arizona? A short sale might be the best solution for your needs. Many people have never heard of the term “Arizona short sale” or “Phoenix short sale”. A short sale in Arizona is when your mortgage company agrees to take a less amount owed on your home in an effort to sell the home before having to foreclose.

Most people who are “upside down” or owe more than their home is worth are left with only 2 options when they can’t afford the payment anymore. The first is foreclosure; obviously no one wants a foreclosure. Believe it or not, that bank doesn’t either. The repercussions of a foreclosure for both the homeowner and bank can be devastating. The homeowner loses a home and destroys his credit. The bank loses thousands in court costs and foreclosure expenses.

The second option is working an Arizona short sale. The advantages of doing an Arizona short sale or Phoenix short sale is coming up with a win-win solution for all parties. For example, when homeowners complete a short sale in Arizona, they have effectively stopped a foreclosure from taking place. And they have significantly lessened the damage to their credit. As far as the bank is concerned, an Arizona short sale has prevented them from repossessing a home. Repossessing a home or foreclosing on a home can cost banks tens of thousands of dollars.

Furthermore, banks are in the business of lending money, not owning homes.

So how does a homeowner qualify for doing an Arizona short sale or Phoenix short sale? This answer will vary greatly depending on the mortgage company at hand. Every bank has different policies and guidelines when negotiating Arizona short sales and Phoenix short sales. For example, some banks will require the homeowner to be 3 months behind before they will even consider allowing an Arizona short sale. Yet, other banks will allow Phoenix short sales even if the homeowner is current with mortgage payments.

Generally speaking, to do an Arizona short sale, banks will require the proof of financial hardship. This can include loss of job, divorce, overwhelming medical bills, and other various financial stressors. Furthermore, the bank will require that the home be listed with a licensed real estate agent. This is usually done to verify the value of the home. Homeowners are typically not allowed to try and negotiate and/or sell the homes themselves when doing an Arizona short sale or Phoenix short sale. In conclusion, if you feel that you can no longer afford your home, and you owe more than what it’s worth, consult with a licensed real estate agent or attorney regarding an AZ short sale.

First of all, “yes” some short sales take long to sell and “yes” some short sale listings can be frustrating.  But let me tell you this; not all are created equal! With a little patience and a little creativity you can overcome some of the shortcomings of listing pre-foreclosure/short sale properties and make a lot of money by helping homeowners get out from underneath the huge burden of debt and stress they are under.

Let’s deconstruct three of the biggest short sale myths:

Reduced commissions
They take too long
Too hard to close

1.  Reduced Commissions

Yes, it’s true when it comes to a short sale; the lender is in the driver’s seat.  And since they hate to lose money they tend to reduce the amount of commissions by an average of 1%, meaning that if your area pays out 6%, they will only approve 5%, which will be split by both the agents involved in the transaction.

You know what I say to that?  Who cares! Be creative! Did you know that there are 7 additional profit centers that can offset your 1% cut in commission?  Let’s take a look at what they are:

A “Loss Mitigation Fee” via the Lender
A “Loss Mitigation Fee” via the Buyer
A “Loss Mitigation Fee” via the Attorney or Title Company.
A “Loss Mitigation Fee” via the Seller
Referral fee from a listing agent (for doing the loss mitigation work on their short sale).
Buy it as an investment (buy and hold or buy and flip).
Any combination of all of the above!!

The “Loss Mitigation Fee” is a fee that we collect only when we successfully negotiate a short sale and have the foreclosing lender pay for all of the closing costs (the realtor commissions, attorney/title company fees, conveyance taxes, etc.).

2. It Takes Too Long

The average loss mitigator receives an average of 30 NEW files a day.  Not a week, not a month but a DAY!  That is part of the reason that short sales can take a while, but it isn’t the main reason.  The primary reason is because the majority of real estate agents submit short sale packages that are less than adequate and professional!  Meaning;

They are incomplete in terms of paperwork (entire documents are missing)
They are arranged poorly (Yes, that makes a difference!)
They are sent to the wrong person or department (happens very often)
They are incomplete in terms of information (i.e. the financial worksheet isn’t completely filled in)

Those and many more reasons cause short sales to get hung up.  Once again, take what the defense gives you.  If loss mitigators are overwhelmed, then the key is to put together a professional and presentable short sale package guaranteed to get your short sale offer reviewed and approved.

3.  They Are Too Hard to Close

With the right system they are not hard!  Let’s take a look at how to overcome the two biggest reasons why short sales blow up right before the closing.

Not managing expectations
This is a negotiating process.  Make sure you clearly communicate the process every step of the way to the buyer and the seller. We use an online short sale management tool called ManageMyShortSale.com to automatically keep everyone connected to the short sale process, which is updated in real time.
Many deals blow up because real estate agents fail to communicate to both the homeowner and the buyer the current status of the short sale and what to expect when they negotiate with the foreclosing lender(s).
Lack of qualified buyers

The key is not to have only one buyer but to have a pool of qualified buyers that are pre-approved.  The best buyers to keep an eye out for are those that are already pre-approved and that have funds in place to make an actual purchase.

The two easiest ways to do that are:
Start networking with every real estate agent that specializes in buyer’s representation. They are easy to find because it is in all of their advertisements.
Start working closely with every single mortgage broker or direct lender that you know, or that one of your fellow agents knows.

In conclusion, listing pre-foreclosure/short sale properties can take some time to close. However; in this market everyone needs to stick together and help one another out. By building the right network of real estate professionals, we can all ensure that our listings (short sales or not) do not sit out there without a buyer!

For more real estate industry news and loss mitigation blogs and videos visit www.RealEstateBusinessMentors.com or visit www.AskBobLachance.com for any short sale bank negotiating questions.

Short Sales: Stacking the Deck in Your Favor

A short sale is a sale in which the lenders allows the sale of a property for an amount less than the existing loan balance. Short sales have the potential for large profits because you, as the real estate investor, are gaining control of the property for a better than expected price.

The properties and situations that will ultimately be approved for a short sale by the lender usually fit a certain profile. When you’re investigating properties and scouting for leads, keep these different factors in mind to improve your chances of getting permission for a short sale agreement. Likely short sale candidates fit a profile that includes factors about the property, the borrower and the lender.

Short Sale Positive Factors for Properties

First of all, certain properties end up being more attractive for the short sale option than others. This includes houses that were purchased or refinanced at a high comparative price, but have since dropped in value due to the real estate market or the condition of the house. This could also include houses that were refinanced at more than their market value based on a high appraisal. Sometimes economic conditions can cause the values of certain areas to spiral downward. Properties located in these affected areas may fit the profile for likely short sales.

Sometimes the property’s value drops below the loan balance for reasons not under control by the owner. Local or even national economic conditions can be at fault. In some cases, the owner’s failure to maintain the property causes it to deteriorate and dramatically lose value. If the lender judges that it’s not financially sound to put things right, they may be more willing to consider a short sale. If the price you propose in your short sale agreement is more than the lender believes they can net after the foreclosure auction, they may favorably consider your short sale proposal.

Short Sale Positive Factors for Borrowers

Lenders are going to take a long, hard look at the borrower and his financial condition before they approve any sort of short sale agreement. In particular, they will want to know if the borrower or someone in their immediate family has experienced a catastrophic illness that has reduced the household to near bankruptcy. The death of a spouse or a divorce could have similar financial consequences on the remaining partner. Forced relocation of the borrower by his employer may be viewed favorably by the lender in a short sale decision, especially if the owner is unable to rent or sell the property. Other significant changes in the borrower’s working situation, including permanent disability, active military service, unemployment or incarceration will also be considered.

Short Sale Positive Factors for Lenders

Finally, even the lender’s own situation may affect their willingness to approve a short sale application package. The lender’s general financial condition plus the status of other loans in their portfolio will bear on the decision making process. This also goes for any third party investor who may actually own the loan. If a government agency insures the loan, then their policies and procedures will need to be met.

To sum up, if the lender believes that the borrower is truly in a hardship situation, then it’s pretty much a comparison of the short sale price compared to what the lender believes they can net after the public foreclosure auction. By essentially “pre-qualifying” the homeowner, the market and the home itself, you can improve your chances of putting together a successful short sale agreement.

Over the last year, many of my clients have asked me about the feasibility of short sales…both from a seller’s perspective, as a way out of an upside down property; and from a buyer’s perspective, as a way to acquire properties below market rate. Up until recently I have advised most of my clients away from short sales…as a buyer or as a seller. The reason was simple: lots of time invested, small chance of success. As a rule, since the housing bubble burst and the credit crunch began, banks have been overwhelmed with defaults and the departments in charge of evaluating and approving short sales have been notoriously slow and inefficient. Trying to negotiate a short sale with the bank often resulted in frustration for all parties involved with a very low success rate.

As a result, I have advised my investor clients to seek out REOs as the best buying opportunity here in Las Vegas. Time, however, are changing. My recent articles on the Las Vegas housing marketing have highlighting the dwindling supply of bank-owned REO properties available. Each month the demand for these REOs and the closings exceed the fresh supply of foreclosed homes coming from the banks. This has resulted in bidding wars across the Las Vegas valley as investors and primary residents eager to capitalize on the best real estate buying opportunity in decades flock to purchase the REOs that make their way on to the market. But with the percentage of homeowners behind on their mortgages still at all time highs, why is the number of foreclosures entering the market declining? The answer may be the increase in short sales.

Brian Wargo of the Las Vegas Sun recently wrote an article discussing this increase in short sales. In it, he quote Larry Murphy, president of the real estate monitoring firm SalesTraq, who says that of the 35,742 closings through the first three quarters of 2009 75% were foreclosures and only 10% were short sales. However, of the 11,249 contingent sales currently in place in Las Vegas, 71% are short sales and only 21% are REOs or foreclosure homes. This represents a dramatic shift in banking policy.

Murphy believes banks are becoming much more willing to consider short sales because they are finally realizing that short sales generate a higher sales price for the banks than REOs. Data supports this. The median price of homes sold through foreclosure is $116,900, while the median price for homes sold through short sales is $150,000.

The federal government has also adopted standardized rules for short sales, simplifying the process. This, combined with the pressure being exerted by the Obama administration to keep homeowners out of foreclosure, is creating a much higher approval rate for short sales. This, in turn, is keeping the flood of foreclosures that we had been expecting here in Las Vegas off the books and creating the progressively lower inventory monthly of bank-owned REO homes.

All-in-all, whether you are a seller looking to get out of an upside down situation or a buyer looking to capitalize on low home prices, now may be a great time to consider the short sale as an option.

Buying Bank Owned REO Properties Using Private Investors’ Money

Copyright © 2009, Lex Levinrad

Many real estate buyers are aware that there are fantastic bargains available in the real estate market. The huge amount of bank foreclosures has led to a tidal wave of bank owned REO properties which has flooded the market with low priced properties. Astute investors are taking advantage of this situation to scoop up houses at bargain basement prices.

If you are considering investing in bank owned properties then you will need to be a cash buyer. This means that you are required to show “proof of funds” which is usually a bank statement which shows that you have the cash available to purchase the house.

If you don’t have the cash available then you will need to borrow the money from someone that does. If you have a relative or friend with access to cash they might be willing to lend you money to purchase a property in exchange for you giving them a first mortgage on the property. They will effectively become the bank and you will be required to make a monthly payment to them.

There are professionals in the real estate business that make these kinds of loans to people that are not relatives. They are called hard money lenders. The only difference between a hard money lender and a private investor is the interest rate. Borrowing from Aunt Sallie might cost you 8% per year in interest. A typical hard money mortgage in today’s market would be 15% plus 3 points up front.

Why would anyone borrow money at such a high interest rate? Let’s look at an example. Assume that you could purchase a bank owned REO property for $40,000 when the house has a true market value to a non cash buyer of $80,000. Paying 15% interest on a $40,000 loan amounts to a monthly payment of only $500.

Assume that you waited 90 days for seasoning of title and then sold the property to an FHA first time homebuyer for $79,900. Assume that you paid a commission of 6% to the realtor and another 6% to pay for the buyers closing costs. You would still net $70,000 from this transaction. After paying off the hard money lender the $40,000 that you borrowed, you would still be left with a profit of $30,000. Even if you held the house for six month before finding a buyer you would only have spent $500 per month in interest for 6 months. Your total interest cost would only have been $3,000. This would leave you with a net profit of $27,000.

Or expressed another way, using no money down (borrowing all of the money) you could potentially make a profit of $27,000. How easy would it be to sell a house like this to a first time home buyer? The answer is it would be extremely easy. The buyers are putting down only $3,000 (3 ½%) to buy a house with a monthly mortgage payment which is about the same as their monthly rent. You are paying all of their closing costs. And the government will give them an $8,000 tax credit if they purchase before the end of 2009. It is a win/win for everyone. The bank gets to sell their property quickly to a cash buyer. The cash buyer gets to flip the property and make a quick profit and the end FHA buyer gets to own a home for the same monthly payment as rent.

The trick to the above transaction is to find an $80,000 property that you can buy for $40,000. This is the part that requires training, knowledge and experience. Finding deals like this is an art form and the people that find these deals are known as “bird dogs” or “property scouts”.

Many bird dogs sell their deals to cash investors for a small profit. This is known as wholesaling. For example a wholesaler might contract to purchase the above house for $40,000 and then sell it for $45,000 to another cash investor. This way, the wholesaler does not need to borrow money from a hard money lender. The wholesaler simply finds a deal, signs a contract to buy it and then flips the contract to a cash investor for a profit. This is known as “assigning a contract” and the profit that is paid to the wholesaler is known as an “assignment fee”.

Banks do not want wholesalers flipping contracts on bank owned properties. For this reason, banks do not allow assignable contracts. This means that a wholesaler cannot assign a bank owned property to another cash investor. The reality is that there are still ways that a property can be assigned. One way is to purchase the property in a Land Trust and then assign the beneficial interest in the land trust. Another way is to purchase the property in an LLC and then assign the membership interest in the LLC. However the problem with these methods is that the end buyer might not want to have a land trust or an LLC.

For this reason, the best way to sell a bank owned property to another cash investor is to have what is known as a double closing.  This means that the wholesaler essentially buys the house from the bank and then simultaneously on the same day sells it to another cash investor. The disadvantage is that the wholesaler will be paying double closing costs.

If a wholesaler has a signed contract and is wholesaling the deal to an end buyer, then if the wholesaler is short on cash they might need what is known as “transactional funding”. Transactional funding is perfect for bank owned properties and short sales that a wholesaler is flipping to an end buyer. Since banks do not allow assignable contracts the wholesaler is going to need to schedule a double closing with the end buyer. Double closings also known as simultaneous closings allow a wholesaler to schedule two back to back closings for the same property on the same day. The wholesaler will need to have a source of funds to pay for the first transaction. This is where transactional funding (also known as same day funds) is needed.

Our company offers transactional funding to all of our Private Mentoring Students. However our students need to schedule both closing with our title company in order for us to offer the transactional funding. We will only offer transactional funding if both closings are with our title company (Independence Title & Escrow).

If you are looking to flip a bank owned property then you will have two contracts and two closings. The first contract is between the bank (seller) and you (buyer). The second contract is between you (seller) and your end buyer (buyer). The end buyer is the person that will ultimately be the long term owner of the property.

Example:

A – Bank
B – You
C – End Buyer

Assume that you have a contract with the bank to purchase a bank owned property at $40,000 (first contract). This is known as the A-B transaction.

You market this property to your cash buyers and you find a buyer at $45,000. You sign a contract with this buyer with you being the seller and them being the buyer (second contract). This is known as the B-C transaction.

The difference between the two contracts (after deducting closing costs) is your profit which you will walk away with at the closing. Since there are two contracts there are two closings. This means you will pay double closing costs.

The transactional funding fee that we charge is 2% +$495 with a minimum fee of $1,250. For example if you were to request $40,000 your fee would be $800+$495=$1,295. We will only provide transactional funding if you use our title company (Independence Title) for both closings.

To learn more about transactional funding please visit  http://lexlevinrad.com/transaction_funding.html

www.ShortSalesAccess.com - Contact Short Sales Access Danville based California Short Sales experts who help process short sales for real estate agents and homeowners nationwide and assist buyers find bargain properties.

Short sale approval can be a lengthy and complex process. Obtaining approval for short sales must be processed through the lender’s Loss Mitigation Department. There are many steps involved with a trail of paperwork.

When lenders engage in short sale approval transactions they agree to accept a lesser amount than is owed on the mortgage note. Typically, a Loss Mitigator is assigned to the Borrower’s account and reviews their situation to determine if they are eligible for this type of real estate transaction.

Short sale approval eligibility requirements include the following:

1) The Borrower must provide proof their home is worth less than the unpaid balance. Generally, this is accomplished by obtaining comparable home sale prices in the area where the Borrower’s home is located. Comp reports can be obtained through Realtors or by conducting research via the Internet.

2) The Borrower must be default on their mortgage note by a minimum of three months. Additionally, the majority of lenders only consider short sales when the Borrower has no equity in their home. If the Borrower has equity or other financial assets, chances are high the lender will not agree to a short sale approval.

3) The Borrower must provide proof they are facing financial distress due to hardships such as extended unemployment, chronic health problems, bankruptcy, death or divorce.

4) The Borrower has no financial assets they can draw from to maintain mortgage payments.
Before granting a short sale approval, the lender generally offers the Borrower a variety of options such as a Loan Modification or Deed in Lieu of Foreclosure. Some lenders will suggest loan modifications which allow the Borrower to roll over the delinquent mortgage payments to the end of the loan. Other lenders will reduce mortgage payments for an extended period of time.

There are multiple options available to homeowners who want to keep their home out of foreclosure. Each comes with their own set of pros and cons. Therefore, it’s vital to investigate all options and determine the best financial decision for you and your family.

Once the decision has been made to pursue short sale approval, certain elements must be in place. Generally, the lender will require the homeowner to have a Buyer lined up. This is best accomplished by working with a Realtor qualified to handle short sale transactions.

Finally, a short sale package must be provided to the lender. Although requirements vary from lender to lender, most lenders require the following information:

• Detailed financial statement outlining income and expenses
• Short sale hardship letter explaining the events that caused you to become delinquent in mortgage payments
• Current bank and investment statements
• Current year tax return
• Realtor listing agreement
• Signed sales contract
• Estimate settlement statement (HUD-1)
• Proof of buyer’s financing

The short sale approval process is not for the faint of heart. It requires patience, tenacity, organizational skills and multiple phone conversations. However, short sales are far less damaging to your credit and less traumatic than the foreclosure process.

It is highly recommended to thoroughly educate yourself about the short sale approval process and work with qualified individuals who are well-versed in this type of real estate transaction. Short sale experts include Realtors, Real Estate Attorneys, Short Sale Specialists and Private Real Estate Investors.