As more and more homeowners are being faced with the daunting prospect of facing foreclosure on their homes, "short sales" appears to be the new trend. If you are a homeowner anticipating foreclosure on your home you might want to consider a short sale of your property.
What is a short sale? In a nutshell, it is when the bank permits you to sell the house short of what is owed on the principal of the note. The balance of the note is usually forgiven and a 1099 is issued to the homeowner for the difference. You would need to consult with your bank to find out exactly what their policy is. Consulting an attorney would also be a good idea.
Why a short sale? By doing a short sale, you prevent foreclosure and can potentially save your credit. When doing a short sale, the bank covers the liens (i.e. outstanding HOA fees and taxes) and realtor fees. If the buyer is requesting closing costs to be covered it is also possible that the bank will be willing to cover them.
The most important thing to know about a short sale is that the process is an arduous one. If you are going to do a short sale, the best time to begin the process is before you begin defaulting on your house payments. Once you begin defaulting, the amount of time you have to find a buyer begins to diminish.
Most real estate agents today have some experience with short sales. The key is finding one who is willing to do them. There is a lot of work involved in seeing the sale to completion.
What is required? Each bank is different. For the most part, in order to have a short sale accepted by your bank you will most likely need a hardship letter that explains why you can't make your house payments. Some required items are financial statements from your bank, pay stubs and an actual offer. Again, you would need to contact your bank to know exactly what you need. In addition to this, you will need to provide the bank with authorization for your realtor to speak to them about your account.
How long does the process take? This is where your patience and your buyer's patience will be tested. Each bank is different. It can take anywhere from 2 weeks to 6 months before you will know if your buyer's OFFER is going to be accepted. Bank processes generally allow a foreclosure to be stalled while a short sale is being considered but there is no set criteria for this. Some banks may not stop the clock fast enough. This is why you want to begin the short sale process before you stop making payments.
The key point to know is that once the foreclosure occurs, it is too late for a short sale to take place.
