October 9th, 2012 8:21 AM by Nathan Rufty
Short sales are not particularly pleasant in the real estate market. There are several ways of losing a home. However, short sale is considered rather embarrassing to the family and destroys your credit stripping you of dignity too. If you are a homeowner unable to keep up with mortgage payments, there are many ways you can get over it rather than declare bankruptcy or foreclosure.
Many of the sales being made in many parts of the country are short sales. They are very popular nowadays in comparison to the past. when a short sale is agreed upon by the lender in the real estate it means they have accepted less than the total due amount. However, now every lender will accept this or even discount payoffs. This is if their estimate determines that a foreclosure will make a lot more sense to them financially. On the other hand, not every home or property qualifies for a short sale. In order to avoid a blow back on your intention, below are considerations to bear in mind.
· get a legal advice from a competent and reliable real estate lawyer
· Call your accountant to discuss the ramifications of short sale.
I-R.S considers debt forgiveness as income. This means the lender can still pursue you for the difference of amount paid and amount owed. The amount is commonly known as the deficiency. The lawyer will determine if the loan indeed qualifies for a claim or deficiency judgment.
As much as lenders have varied requirements and often demand that the borrower gives an array of documents, you can consider the following things to know your expectations.
· Call your lender
Find the person responsible for handling of short sales. Get the name and that of the supervisor.
· Submit a letter of authorization
This will enable you to get your personal information. Closing agent, real estate agent and Title Company will give a better response if you write this letter to your lender giving them permission to chat with the interest groups above on the loan. The letter should have property address, your name, the loan reference number, date and the name of the agent and their contact information.
· Preliminary net sheet
It is an estimate of closing statement showing the sales price you will receive and the costs of sales, outstanding payments due, unpaid loan balances and the late fees. In addition, it has the real estate commissions if there is any. This will be prepared by the real estate agent if you can’t calculate the fees. If there is cash to the sellers at the bottom, it means a short sale may not be necessary.
· Hardship letter
This entails your explanation on how you got there and a plea to the lender to accept less than the full payment. Many lenders will understand, as they are also humane and will accept if you are honest. If you are not honest or show criminal behavior.
· Proof of assets and income
You should be truthful about the financial situation and disclose your assets. The lender will want to know your savings accounts, stocks, negotiable instruments, cash, and anything of tangible value.
· Copies of your bank statements
If there are, any unaccountable deposits or large cash withdrawals ensure you explain them.
· Comparable market analysis
Look at the prices of pending sales, active homes in the market and those sold in the last six months.
· Listing agreement and purchase agreement
When you have arrived at an agreement on the same with the buyer, give a copy of it to the lender and that of the listing agreement too. The commissions will be renegotiated by the lender definitely.