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.

Short sale approval occurs when banks allow borrowers to sell their property for less than the balance due on the mortgage note. The primary goal of short sales is to minimize lenders’ financial losses and prevent the property from falling into foreclosure.

Short sale approval is based on many factors and varies by lender. Unified criteria include: properties cannot be in foreclosure; borrowers owe more than the home is worth; and borrowers cannot own assets which can be used to satisfy the mortgage note.

The biggest mistake borrowers make is procrastinating about contacting their lender when they become delinquent with payment. This usually stems from embarrassment or fear. Believe it or not, lenders do not want your property. They are in business to make money, not manage properties. Most are willing to work with borrowers and devise a plan that is beneficial to both you and the lender.

The short sale process typically takes between four to nine months. Much depends on the bank’s caseload, number of lenders involved, and ability to locate a buyer. The process becomes more burdensome when borrowers hold a second or third mortgage against the real estate.

Borrowers will work with a loss mitigator assigned through their lender. Mitigators do not make final decisions on short sale approval, but can be instrumental in helping obtain a successful outcome.

Loss mitigators are overwhelmed with work. They are oftentimes verbally abused by frustrated, stressed-out borrowers. If you want an edge on obtaining short sale approval, be nice to your mitigator. Organize financial records and provide requested information in a timely fashion. Take time to thank the person for assisting you through this difficult process. As they say, you catch more flies with honey.

Banks generally require borrowers to submit a short sale packet consisting of a variety of financial documents. Expect to provide bank, credit card and investment statements, previous years’ tax returns, tax or creditor liens, list of income and expenses, spousal or child support orders, and property tax and homeowners’ insurance receipts.

Lenders oftentimes request borrowers to submit a short sale hardship letter outlining events which caused them to become delinquent. The hardship letter is a crucial element toward obtaining short sale approval. It should be crafted with care and include dates of events which took place. Events might include loss of employment, death of a spouse or child, divorce, or chronic illness.

Many banks require borrowers to have a sales contract in hand before authorizing short sale approval. Others grant time to list the property through a realtor to locate a buyer. Borrowers can save time and money by selling to real estate investors.

Today, investors are particularly interested in foreclosure and short sale real estate because these properties are sold below market value. Use the Internet to locate investors in your area or ask friends, family, realtors and banks for referrals. Some investors purchase real estate across the nation, so if you are unable to locate a local investor look for nationwide investors.

Investors oftentimes purchase distressed properties with cash in order to obtain a lower purchase price. Everyone knows cash is king and lenders are generally more receptive to working with buyers who have cash in hand.