In the previous post “What is a short sale? Part 1“, we discussed some basics of short sales, like why someone would pursue one and whether it’s an option for everyone (it’s not). Let’s continue that train of thought and address some other questions here:
What’s Involved in a Short Sale?
One unfortunate joke about short sales is that they almost always take a LOOOOONG time to complete, sometimes 6 months or more. And that’s IF you get a satisfactory settlement. In the wrong hands, you could be in it for that long only to see it get rejected (so make sure you work with true pros like US). The process is not overly complicated, it just takes an in-depth knowledge of the system, such as how the lender views the overall landscape of borrower, property and their investor guidelines.
You’re initially going to submit a lot of personal and financial information: 2 or 3 previous tax returns, pay stubs, financial worksheet, hardship letter and a few others. You’re also going to have to list the property on the MLS and send the listing documents along with the previous items to your lender as one package.
One key item that you’re going to need is an offer to buy your property. Your lender won’t agree to a short sale if there’s no one to actually sell it to (hint: we’ll buy it!). You can have the most heartfelt hardship situation and the financials to back it up, but you must have a buyer ready to step in. Otherwise, your short sale package won’t even be considered complete and won’t get beyond the initial gatekeeper of your lender. Your most likely source for buyers are investors (like us) who understand the timeframe involved and don’t mind waiting 6 months to close. Most regular homeowners will not be willing to wait that long, especially when there’s no guarantee of a short sale approval, so an investor buyer is usually your best option.
Once your package has been marked complete by your lender, they will schedule a Broker Price Opinion (BPO) where a locally contracted real estate agent will assess the market value of your property. That number will then be relayed back your lender and negotiations on the short sale approval will begin between the lender and the seller’s negotiator. If an agreement on price and other terms is reached, then you’ll get your approval. It’s actually more complicated and detailed than this – I’m just providing a rough overview of the process here.
Is a Short Sale Right For Me?
That’s a question that only you can answer yourself, but you can help do so by speaking with other professionals in the industry, such as your CPA to discuss any possible tax implications. Your goals also play strongly in this decision. If your main objective is to keep the house, then you should talk to your lender about a loan modification first before pursuing a short sale. Unfortunately, many people who’d prefer a loan mod are unable to do so and the short sale becomes the next best option to avoid foreclosure. If you think you’re better off by removing the problem mortgage and house from your life and just moving on, then a short sale is likely the way to go.
Remember, a short sale is often a great way to stop foreclosure and should be strongly considered among all options, especially if you’re considering just walking away. If you’re having trouble with your mortgage or are already in preforeclosure, then I want you to get on the phone and CALL US at (888) 545-0003 Hawaiian time or send us a message HERE and we’ll discuss your situation personally.