There have been numerous measures taken by legislators and private organizations to pursue advancement of consumer protection in the real estate industry. A buyer or seller can also benefit from various online sources that provide guidelines in entering a particular transaction. Then again, there are some aspects that the lenders or banks themselves do not divulge to their clients. For one, there are details of short sales your lender would not tell you before or even during the transaction.

First of all, lenders are not legally required to disclose every single detail to their borrowers. They are given the right to acquire their own measures in protecting their investments. Especially with short sales, lenders have full control whether to give you a shot in entering this venture. As they want to still yield profit despite losses from your delinquency, they would naturally do everything in their power to manipulate the transaction. However, as a consumer, you also have the right to be in the know of the transaction aspects that can affect your decisions. Below are some areas where lenders tend to keep some sort of confidentiality.

Hardship letter contents

Only one out of ten applications for a short sale gets to be approved in most banks. Most lending companies approve hardship letters that are compelling enough. This may seem shallow but even the ink color and paper used can influence some lenders. Then again, they can easily sense if your appeal is lacking authenticity.

Disinterest in your property

The main concern for lenders is the money you owe them. They are particularly evaluating your property either as an asset or a liability. And once you fall out with your dues, the lesser interest they would want to keep your property, lest visit your home. They will do every measure to fast-track disposal of your property. Then again, they will not disclose such information so as you will maintain attachment to the home, thus, remain indebted to them.

You can stop paying your mortgage

A lending company will be more motivated to accept a short sales if you default on your mortgage. Note that it is not necessary to be in default before you can consider entering a short sale. But once you take on this option, there are pressing drawbacks you have to thoroughly think of. Firstly, your credit report will suffer. You may be restricted from buying a new home and even easily lose your property to foreclosure.

No repayment obligation

This is only applicable if you are facing true financial hardship. You have to prove you have no other saleable assets to gain profit from or extremely have no means to pay your mortgage dues. Lenders are prohibited to enforce you to pay back what you owe if this is the case. But this does not mean the lender cannot file for a deficiency judgment.

By learning these ‘trade secrets’, you can be more adept in formulating a proposal that your lender will most likely approve of. On the other hand, being overly complacent that you will ace the approval of your short sale endeavor is still not advisable. You have to continuously plan ahead of time and be prepared of other demands your lender will present to you

Husband lost his job in Dec. Just had a baby in Dec. Prop is investment property in FL with tenants who if approved want the short sale. Property tax …. to pay or not to pay in light of short sale or foreclosure? Also .. Any advice on how to get Chase to lean toward short sale?

Down in Florida, moving from DC. A new listing hit the market and my realtor called us on the drive down. It had everything we wanted. It was marketed as “Fully Bank approved Short sale”…..”Bank says bring me a buyer, A.S.A.P. Under broker remarks it stated “Loss mitigator approved, bank said bring me a buyer. Very Quick close”

So we drove all night as the listing agent says this…..”I have three other offers on the home and have to submit them all tomorrow morning.”

When we arrived we went and viewed the home with our agent at 12 am. We wrote up the offer at 2 am. Our agent called the listing agent to make sure it was as advertised as we had to staye in a hotel until closing. She assured us it was and the approrval would be rubber stamped in less then 2 weeks.

Long story short she lied. It was just a regular old short sale. We stayed faithfully in a hotel at an expense of more then $7000 for over a month.

I found out all the stuff, including the multiple offers, was all a LIE! She wanted an offer at a certain price range so it would be approved.

I am thinking to contact some lawyers. I want our living expenses paid and her to compensate us for all this. We would have never offered had we known the truth and the stories about mutiple offers is criminal I would think!

How would you handle this?

When you are starting to be behind your mortgage payments, you need to avoid undergoing foreclosure. The negative impact of foreclosure is deeper compared to other ways of settling the unpaid debt. This can scar your credit for years and this is a much- dreaded way to lose your homes.

This is the reason why most people would look into the possibility of short sale. Undergoing short sale does not mean you can escape the negative effects on your credit. However, it certainly has more advantages compared to foreclosure. One, you can be eligible to get a new mortgage after 2 years as opposed to foreclosure which is after 5 years. Second, you can keep your dignity because. Third, credit scores deduction can be as low as 50 points and the effect can be as little as 1 and a half years.

There are so many good things about short sale. However, the challenge lies on how to get your lenders approve your offer. Short sale is known to be a tedious process in the sense that lenders are being critical about it. They want to ascertain well if your offer is worth absorbing the loss.

One way to get your lenders to accept your offer is by understanding their point of you. There are certain things you should know about your lenders and short sale.

Reasons why lenders would settle for short sale

You may wonder why lenders would allow a loss for sale in exchange for the forgiveness of you debt. Well, here is the real reason. They want to reduce their number of non-performing loans.

In lending, loans are considered performing if the borrower is able to keep up with payments on a regular basis. However, once the borrower starts to be in default for 90 days or more, the loan will be considered non-performing. Lenders do not want them because if their number rises, they could be in trouble financially. Non-performing loans can have a negative impact to their financial statements and eventually would put them out of business.

This is the reason why lenders would opt for a short sale. This transaction can minimize the number of non-performing loans of the bank. They would take their chances from this transaction, especially if they already have an increasing number of non-performing loans.

On the other hand, short sale loss is usually lesser than foreclosure. Banks can set an allowable loss for short sale to take place. Moreover, banks would also avoid the hassles of foreclosure if they accept short sale offers.

Additional information about lenders and short sale

The chances of being approved of your short sale offers lies on several considerations. One, if the application of short sale falls within the 180 days grace period before the non-performing loans of the bank will be considered a liability. And two, the loss of short sale is acceptable for the third party investors involved like Fannie Mae and Freddie Mac. For Fannie Mae, it is acceptable if the loss is less than foreclosure. For Freddie Mac, it is acceptable if the offer reaches 90 to 92 percent of the BPO or Broker’s Price Opinion.