| With so many homes in foreclosure at this time, many | | | | Last, you will want to contact the lender. Most lenders |
| people are hearing the term 'short sale'. But what is a | | | | have a loss mitigation department. If they do not, you |
| short sale and is it something you should look into? | | | | will want to find out who makes the final decisions on |
| The term short sale comes from the fact that the | | | | negotiations. You will also want to have contacted the |
| homeowner and the bank are trying to sell or get rid of | | | | homeowner and completed an authorization letter that |
| a property as quickly as possible. To do this, they | | | | is notarized, which gives the lender permission to |
| often price the home below its current value. A short | | | | discuss the mortgage situation with you. The lender |
| sale is different than a foreclosure in that the home is | | | | may ask you to complete a short sale application. |
| not taken back by the bank or lender but kept in the | | | | Once this is complete, you are now prepared to put |
| borrowers name. Doing this helps the borrower protect | | | | together your proposal. Yes, a proposal. A proposal |
| their credit while getting out from under a loan. | | | | package includes the application, authorization letter, |
| Agreeing to a short sale does not release the | | | | plus the following: |
| borrower from paying the balance of the loan though. | | | | • A purchase and sale contract |
| Both the borrower and the bank take a small loss, the | | | | • A hardship letter showing the homeowner |
| bank tries to recapture as much of the properties | | | | has fallen behind on payments by 90 days and why |
| value while the borrower tries to keep their credit | | | | the lender should accept your offer. This letter includes |
| intact. | | | | information by the seller as to why they cannot afford |
| To participate in a short sale, you should do as much | | | | the house. This can include evidence such as a job |
| homework as possible, just as you would if you were | | | | loss, delinquent accounts, utility shut off notices, car |
| purchasing a foreclosure. | | | | repossession paperwork and so on. |
| Although the bank is trying to move the property | | | | • Estimate of property value. |
| quickly, the process of purchasing through a short sale | | | | • Details of costs and liabilities |
| can ironically be quite lengthy. To participate in a short | | | | • A settlement statement, which outlines the |
| sale, there are many steps to be made and then the | | | | purchase price, closing, costs and other costs involved |
| lending institution must make the final approvals, which | | | | in the transfer of the property. |
| can take some time. | | | | After all of this has been given to the lender, it is not |
| If you are interested in purchasing through a short sale, | | | | uncommon that they may come back to you with a |
| you must first identify potential short sales or what is | | | | counteroffer and that you will have some negotiating |
| called preforeclosures in your area. You can search | | | | to do. Once you agree upon an amount, you, the seller |
| courthouse listings or legal ads. You want to determine | | | | and the lender get everything in writing and record it. |
| how much is owed on the house in relation to its | | | | You want to make sure the seller understands all of |
| approximate value. | | | | the terms of the deal. Next comes the closing and the |
| You will then want to view the property and come up | | | | property is yours. |
| with an estimate of how much it's going to take to | | | | While this process sounds easy, there is a lot of |
| repair or renovate it. Find out what the property is | | | | footwork and homework to be done along with a |
| worth and what the profit potential is. Ask the seller or | | | | need for patience. There are professionals that can |
| agent if there are any liens on the property and which | | | | help you with this process as well. But in the end, it is |
| lender is the primary lien holder. | | | | possible you could get a property for a good price. |