Six Steps Toward Completing a Short Sale

[May 15, 2009.]

 

The Obama administration announced additional incentives for homeowners and mortgage lenders to cooperate in completing short sales, also called pre-foreclosure sales, as an alternative to foreclosure.  Potential cash incentives ($1000 for lenders and up to $1500 for homeowners) may increase completed preforeclosure sales, which often lag behind other foreclosure prevention methods due to their complexity and the need for cooperation between homeowners, real estate professionals, lenders and mortgage insurance companies. Homeonwers experiencing financial distress beyond their control and who must sell their homes may ncrease their chances of completing a short sale by taking these steps:

• Determine current home value and market conditions: Hire a real estate agent or broker to provide a current value and market analysis for the home being sold. This information can help in determining whether a short sale is feasible.


• Gather personal financial information: Mortgage lenders frequently require extensive personal financial information for verifying financial hardship. Prepare to submit copies of a monthly budget, bank statements, paycheck stubs or deposit receipts, tax returns for the immediate past two years. Homeowners may also be required to authorize and pay for a credit report. Lenders typically require a signed written request for help that outlines the reasons for hardship and requesting approval of a short sale.


• Formulate a strategy for selling and moving: Try to work with a real estate professional who specializes in short sales. Discuss the likely timeline for relocating.


• Communicate with mortgage lenders: Short sales require negotiations between several parties, and mortgage lenders typically coordinate these negotiations. Home equity lenders will be required to release their liens.


• Honesty is Important: Don't try to "fudge" financial information or "forget" to mention savings and other assets. Eligibility criteria for shorts sales is based on individual circumstances.


• Follow up:Don't assume that real estate agents or lenders are taking care of a short sale offer. Lenders are deluged with short sale requests, and real estate agents have multiple homes to sell. Check in with your real estate agent and lender every few days to make sure that nothing is overlooked.

After completing a short sale, homeowners  may turn their attention to buying another home. Contributing  regularly to a savings account specifically dedicated to buying a home, shopping for mortgage loan rates, and comparing loan terms using mortgage calculator tools are helpful ways to prepare for buying a home.

 

About Author:

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.