Considering A Short Sale? Learn The Process.
When a homeowner is selling his property for less than the amount owed to the lender, this is called a short sale. Lenders don’t encourage this practice. However, a lender may agree to accept less than what is owed when the mortgage is in default. Depending on the net proceeds offered by the sale, the lender may decide to accept an offer, especially if the net proceeds are expected to meet or exceed what the lender would receive after reselling the property after foreclosure. Additionally, in the case of foreclosure, the lender would have to safeguard and carry the property until it sells, and incur costs preparing the property for sale.
As part of the process, lenders may require financial information from the seller demonstrating that the seller has a genuine lack of ability to make the payments and repay the loan. Perhaps the seller has lost a job or been laid off by their employer. Perhaps divorce, death, or medical problems have caused difficulty in maintaining payments. If the seller is not financially capable of making payments and bringing the loan current, the lender may agree to a short sale after assessing the seller’s circumstances.
The lender may request pay stubs, bank statements, and other related financial information, including a budget which shows all monthly expenses.
A good real estate lawyer, someone who handles short sales, will know how to best present the information for a favorable decision. The lender will hire an independent agent to perform an analysis of the property’s market value, called a BPO or appraisal to make sure the sale price is in line with the value they receive.
Every lender processes short sales differently. The process can take from several weeks to several months, depending on the lender and on who you chose to negotiate your short sale. Negotiators spend hours working with lender and you as the homeowner, obtaining and processing documents, often on the telephone with lenders, preparing packages for presentation to the lender or servicing institution in order to ultimately get the short sale approved by the investor. They have to have good negotiation skills and be relentless in their pursuit of short sale approval. There are deadlines to meet, and often upcoming foreclosure dates which may need to be postponed. A good short sale attorney has the necessary skills in order to work effectively with the lender and trustee to postpone the foreclosure in some cases.
Real estate agents can negotiate short sales, and you may choose to work with an agent to accomplish this goal. However, there is a great advantage to hiring an experienced short sale law firm to negotiate a short sale for you.
The attorney is working on behalf of the seller and can work with all parties to get the short sale approved, is generally someone who is familiar with short sale procedures employed by lenders, and can devote the time to getting your short sale reviewed and ultimately approved in a timely manner. The attorney is working for the seller and is paid independently from the agent, sometimes the legal fee is paid by the prospective buyer.
Depending on your circumstances, there may be other options available to you. It is generally to a homeowner’s advantage to avoid foreclosure, because of serious credit ramifications. A foreclosure will affect your credit score and remain on your credit report as a public record, for up to ten years after the foreclosure is reported by the lender. It is believed that a short sale will have a far less negative impact on your credit report and may be reported for a shorter period of time. With a short sale, a homeowner may have a chance to rebuild their credit sooner, and possibly qualify to purchase a home in the future, much sooner than in the case of a foreclosure. Homeowners should consult a credit advisor to determine the impact a short sale may have on their credit report. A short sale may present a good opportunity to avoid foreclosure, but there may be alternatives, in your particular situation. Need Information? Contact the attorneys at Marine View Law to speak to an attorney who successfully negotiate short sales daily.
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Remember, the information on this website is informational in nature and should not be considered legal advice appropriate for your situation. Individual circumstances vary, so for best results contact an attorney who can assess your needs and determine whether a short sale is right for you as a property owner.