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If you’ve been investing in real estate, and more specifically preforeclosures, then there’s no doubt that you’ve come across a short sale deal. A short sale is when the lender agrees to accept less than what is owed against the property in exchange for full acceptance of payment of the loan. In other words, if the loan balance is $400,000 but the bank accepts $300,000 as full payoff, then a short sale has occurred.
Many investors find short sales different to negotiate and complete. The reason is that lenders are constantly changing their rules and practices, and short sales by nature are complex and time consuming. This is a reason that many smart preforeclosure investors today choose to outsource their short sales.
Outsourcing your short sales is simple. You would still meet with the homeowner and get all of the necessary paperwork to ensure a complete short sale packet. But after that, the ease and simplicity of outsourcing takes over. The investor simply sends the complete short sale packet to their outsourcing company, and they are the ones that then do all of the work on behalf of the investor.
The investor’s time is freed up considerably, as they no longer have to sit on hold, fax paperwork, or do other mundane tasks associated with negotiating a short sale. The outsourced short sale company takes care of all of this work for the investor.
Outsourcing your short sales makes perfect sense as a real estate investor. Since the outsourcing company is working on many files for many different investors, they are building more relationships faster at a wide variety of lenders. They have a larger rolodex of contacts at more banks, and have a proven track record of closing deals with many lenders, thereby making their files and their deals more desirable for the lender to look at.
In today’s world of outsourcing, it’s no longer necessary for a real estate investor to negotiates his own short sales. In fact, it’s not a good use of their time. Preforeclosure investors should be focused on buying and selling properties, not negotiating short sales or faxing documents to lenders trying to get a short sale deal closed.
Outsourcing short sales allows real estate investors to work on more deals at once, and have a virtual team of experts on his staff, without the overhead. The best outsourced short sale companies are paid on performance, after they have negotiated the short sale deal to the price that the investor has set. This makes outsourcing a no risk proposition for the smart preforeclosure investor.
Terry Wygal is an expert on real estate investing in Short Sales and has several strategies for Closing Short Sale Deals and has been working with Justin Lee.
A short sale, by definition, is the sale of a property to a lender for less than the amount of the mortgage owed. This sale is often only permitted under extreme circumstances. The bank or mortgage lender takes into account current economic outlooks, the personal financial situation of the debtor or home-owner, the local real estate market, and the reasonable possibility that the bank will recover some, if not the entirety, of the mortgage loan. The advantages of short selling a property to the debtor are obvious. A short sale is often pursued instead of foreclosure proceedings. Thus, by short selling a property, a debtor can keep a foreclosure off of their personal credit history. Also, the difference between the original mortgage and the short sale offer, also known as the deficiency balance, is partially under the control of the debtor. This means that the debtor is free to pay back the deficiency under their own terms. Sometimes, though rare, this debt is forgiven completely.
The advantages of a short sale are less obvious for the bank or mortgage lender. These institutions are primarily concerned with recouping their financial losses on bad or risky loans. Thus, they may choose to allow a short sale if they believe that this course of action will result in a smaller financial loss than foreclosure proceeding. Whereas a foreclosure can cost the bank or mortgage institution a certain amount of money through legal fees and court proceedings, a short sale is simply an agreement between the debtor and the lending institution and entails much less hidden costs to the lending institution. Oftentimes, a short sale is the best method for the bank to guarantee at least a partial return on a bad or defaulted loan.
A short sale is a fairly common business transaction. However, lenders do not like to view these transactions as financial favors to the debtors. Rather, these institutions view these short sales as sound financial extensions of credit. When retaining an asset makes little business sense or is economically unfeasible, a business will default on their loans. If enough of these loans are defaulted on, a bank or mortgage lender can be put in dire financial straits. Thus, a short sale is utilized to reacquire these economically unfeasible assets and recoup a portion of the extended and defaulted loans. In this manner the financial institution looses only a fraction of the accumulated debt. In these types of business short sales the deficiency balance is almost always forgiven.
There are a number of steps that debtor must take in order to secure a short sale from a bank or other financial institution. Most banks require that a Notice of Default be completed. This alerts the local government of the impending default and stipulates the location, relative value, and financial history of the defaulted property. While conditions vary from bank to bank, several levels of approval are usually required. This is often a long and complicated process for the debtor. Some banks have set limits on short sales, and these restrictions can vary in amount or type. For example, many banks won’t approve a short sale if there are tax liens held against the property. However, if approved, a short sale can be a great way to relieve debt obligation without permanently affecting your credit score.
With how the economy is going today, there are a number of people who are having a problem facing their financial obligations. These financial obligations are not only apparent on daily bills but also for mortgages and other loans. And if you are having some problems in sustaining your mortgage or your property, you might want to try short sale instead of having it on foreclosure. This is perhaps the best way for you to face lesser credit standing issues.
However, what is a short sale and how will it have an effect on your credit score? Short sale is the instance where you are going to sell your property, with the approval of your bank of course, at a discounted price compared to its original price. In this way, you can pay the amount that you owed the bank.
If short sale was done properly, there is a great chance that your credit standing is not going to be affected. How can you execute this properly? You should be able to put your house on sale with very few expenses. If it is possible, convince the lender to get the full amount of sales in order to cover for the whole amount loaned. At the same time, if you will be getting help from an agent, find someone that will ask for smaller commissions.
However, if the amount of sales is not enough to settle the debt, you can pay the remaining amount in terms. This is called loan for deficiency that will allow you to pay at the most affordable price and flexible terms that you can keep up with. You just have to be aware that it will definitely reflect to your credit record. But granting that you can pay them properly, the effects will not be that detrimental to your credit record.
Another option in order to get the remaining amount owed is a suit. However, doing this option is going to give a negative judgment to you. And thus, will result to a much greater credit report issue.
So basically, the effects of short sale on your credit record are based on how you settle the remaining amounts after the sale. Be sure to be committed in paying the remaining amount if there are any. If you will not be paying it properly then you are just putting your credit score to a big problem.
So if you want to settle the amount that you owe through short sale, it is important for you to ask your bank for these and other options that might have lesser effects on your credit score. In this way, you can avoid future problems in terms of finances as low credit records will make your charges much expensive than it should be.
And for beautiful and safe neighborhood options, you can check Real Estate for Sale in Scottsdale AZ and Scottsdale homes for sale for some great real estate deals. This home is without a doubt a good investment that you can get for yourself and for your family to live in.
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.
Facing foreclosure isn’t easy and your options are few, yet you do have options. A short sale may be the perfect solution, but you should really understand how and why they work. For more information visit http://www.theshortsalehouse.com .
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.
Reed Lattin is real estate investor in Phoenix, AZ And owner of AllHomesAZ.com which buys all homes AllHomesAZ.com-member of the Better Business Bureau Get short sale help at www.allhomesaz.com/arizona short sale help Contact Reed Lattin directly at 480-227-5214
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!
Before joining North Shore Enterprises (NSE) in 2004, Bob Lachance was a 4-year-collegiate-scholarship athlete in ice hockey at Boston University where he won a National Championship in 1995. After leaving BU he enjoyed a successful 8 year career as a professional hockey player. Upon retirement from hockey, Bob completed several profitable real estate rehab projects for his own benefit. He then joined NSE as an associate responsible for property acquisitions and loss mitigation/lender negotiations. Bob brought the same determination and work ethic that lead to great success in his professional sports career and thus generated more acquisitions and short sale acceptance letters in a shorter time frame than any associate before or since. His outstanding performance led to a promotion to partner in 2005. Since that time, Bob has taken responsibility for all the day to day operations of NSE. As partner, he has overseen the acquisition of, the loss mitigation, and the disposition of over four hundred properties. Bob continues to be directly responsible for identifying good candidates for acquisition and for overseeing bank negotiations, and has been essential to the success and growth of NSE.
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 is an alternate to bankruptcy or foreclosure proceedings in real estate. Home owners who are incapable to pay back the mortgage loan on the property sells the property less than the outstanding loan and the entire dealings goes towards the repayment of loan to the lender or the bank. Here the mortgage lender or the bank agrees to reduce the outstanding loan amount on the home due to the economic hardship of the borrower wherein he is unable to repay the loan further.
In short sale the lenders or the bank approves the sale process of the house when they make out that the loss they will bear is negligible as compared to foreclosure. But the transaction of property proceedings is completely to the approval of the bank or the lender. They can approve or disapprove the transaction as according to the payoff they will be receiving on the sale. However all the lenders or the banks have different set of parameters for the procedure of a short sale.
As a seller your credit report in case of short sale seller will be affected. You will come under the scrutiny of the mortgage lenders and the banks in case of fresh loan approval but still the case of will be well off than bankruptcy. You must understand that although bankruptcy does not stop you from buying home but in this case for approving mortgage loan for buying house you need big down payment and be ready to pay higher interest rates on the loan taken. Short sale option is considered to be much better option for owners in financial hardships.
You must also understand that every property or home owner is not eligible for short sale. This procedure has some set criteria which have to be fulfilled by the home owner and the property before the deal proceeds. Here are some criteria for short sale. First, the home owner cannot repay the loan further due to financial hardships. However cases like moving out, miserable neighbors or bad buying judgment does not count in financial hardships. Secondly, if the existing price of the house is less that the loan amount due like in case the market rate of the house has dropped. Thirdly, the mortgagee has no other asset apart from the said property to repay his debts and fourth, the mortgage loan is in or near in default. At times even in current the bank might consider short sale if the value of the property has depreciated.
Sometimes even if you fulfill all the conditions you still are not eligible for a short sale if you do not have a proposal from the buyer because the offer that the buyer make to you has to be accepted by the third party, the lender or the bank in case of short sale. Once you qualify for a short sale you must always remember that this will influence your credit report.
As a buyer of short sale property there are important things that you must consider before doing the transaction. Like knowing the total outstanding amount the seller owes to the bank you can always quote the right offer so that it is neither below nor overpriced. Also the offer has to be approved by the lender too for short sale transaction so you must understand all pros and con of the transaction as the entire deal might take months. Also find out if the existing home owner is in default or not because you do not want to make any investments with any extra expense in future.
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