Out of all the ways to lose your home, few are as embarrassing as a foreclosure. It destroys your credit rating and strips you and your family of most of your dignity. For a homeowner the lowest you will ever feel is when you are unable to pay your mortgage, and your family are facing the prospect of life without the comfort of a home. A short sale is far from being the easiest or most pleasant ways to go, but it does offer you the opportunity of leaving with your dignity intact.
The short sale is simple enough to understand but is not very easy to do. It requires a lot of paperwork and could take months to facilitate. When the financial institution you used agrees to a short sale, it means the institution is allowing you to sell your home, for less than what you owe to them. Remember that the lender doesn’t necessarily have to agree to a short sale especially if it would make more sense financially to foreclose, and not all properties even qualify for the short sale option. The only way to know for sure would be to contact the financial institution use to purchase your home and find out before you commit to anything.
This task can be a long and difficult process to undertake. Not all financial institutions work the same way, some will be extremely helpful and give you detailed information about everything you will need, while others will pretty much leave you to your own devices and only get involved when it is their turn to do so, it all depends on who you talk to and how far up you are able to get. To give you a brief rundown of what to expect and what you might need I have listed below the steps you will need to follow on your way to completing your sale.
The first step would be to call the financial institution you used to purchase your home. You may need make many phone calls to a number of people before you find the person that is responsible for handling short sales. What is most important here is that you speak to a person capable of making decisions, get their name and telephone number, don not deal with any departments like short sales departments or work out departments, they will be unable to make decisions and will ultimately waste your time.
Next would be to submit a Letter of Authorization. Financial institutions will normally not disclose any of your personal information to any outside parties, the buyers for example and if you’re working with a real estate agent, closing agent, title company or a lawyer, you will most definitely receive better co-operation from the institution if you submit a letter to them giving your permission to speak with outside parties about the short sale. This letter should include:
- The address of the property
- Your mortgage reference number
- Your full names and surname
- Your Identification number
- The name and contact information of your agent
- The date
The preliminary net sheet is the estimated closing statement. It will show the sales price you can expect to receive, all the costs of the sale, unpaid loan balances, outstanding payments due, late fees and any real estate agent fees like commission if applicable. This can be prepared for you by your lawyer or closing agent if you would be unable to calculate all these costs yourself.
A hardship letter could be the deal breaker in these situations, and should be made as sad as possible. It should include how you got into this financial situation and will be your plea to the institution to accept less than the full payment. Financial institutions are not all about profit and loss and will understand if you perhaps lost your job, were perhaps hospitalised for a long time with a serious condition or have recently suffered a massive personal loss. An important thing to remember though is honesty as they will be far from sympathetic to situations involving criminal behaviour and dishonesty.
Copies of your bank statements should be provided as well. If your account is showing weird fluctuations it would be best to explain the anomalies, as the financial institution may want you to account for each and every transaction made to make sure they can determine whether deposits can continue. A proof of income and assets should also accompany your bank statements, and it is a good idea to be one hundred percent honest about your situation and all assets should be disclosed. Playing with this would be like online gambling and not be the best idea. Financial institutions will go through your statements with a fine tooth comb looking for any savings accounts, stocks or bonds, cash real estate or pretty much anything of value to make sure you cannot pay back the debt you owe and that the short sale really is your last option before foreclosure.
A comparative market analysis would be extremely helpful to your cause. Markets decline and property values fall over night, if this is the reason you are being forced to sell your property short, it should be substantiated to the institution. Once again your real estate agent can help you here and it should include show houses of a similar price that are:
- Active on the market
- In the process of being sold
- Any sales that occurred within the past six months.
Last but certainly not least your documents should include a purchase agreement from the prospective buyers and the listing agreement you worked out with your real estate agent. Be prepared for the financial institution wanting to renegotiate commissions and refusing to pay for certain items such as building inspections, these can also be worked out with each party.
If all these steps are taken properly, the institution will approve your short sale. It wouldn’t hurt to ask them not to report adverse credit to the appropriate agencies, but remember they don’t have to do this as credit report statuses are not always negotiable.
