Real estate foreclosures are devastating to your neighborhood, your credit score, and most importantly your self worth. Being forced out of your home is humiliating and can tear families apart. There are better choices as we discussed in a our previous blog “Real Estate “Short Selling” a Better Option Than Foreclosure” we discussed the issue of short selling and why it may be the perfect tool for you preventing foreclosure on your home. Today, we break the process down for you and demystify the process.
1. As the homeowner you give us a written agreement for permission to speak with your lender on your behalf. The agreement, which can be a power of attorney, should specify the property address and loan number. We will also need the last four digits of your social security number for verification with your lender. Either you or we will on your behalf, ask your lender if they will consider a short sale before beginning this process.
2. We will place your property on the market for fair market value. Most lenders will only consider offers that are at least 75-80% of what the property appraises for, based on their independent appraisal.
3. When we get a contract, we’ll ensure that it states it is “contingent on seller’s mortgage holder’s approval”. Your signature is required on this contract.
4. We’ll send the contract to your lender with the following documents: mortgage pre-approval letter for the buyer, hardship letter which explains why you need a short sale, financial worksheet itemizing all income and expenses (may be provided by lender), last two years tax returns, recent pay stubs, recent bank statements, copy of the listing agreement, copy of MLS printout, estimated net sheet.
5. You can expect to wait two to eight weeks for final approval from the bank “negotiator”. During this time the lender will order an independent appraiser or broker price opinion of the property.
6. If approved, the lender will provide a letter with instructions to the title agent regarding the reduced pay-off amount. Typically, the lender will absorb all closing costs including conveyance taxes and broker fees. Escrow monies, however, may not be returned to the borrower, such as for taxes and insurance, and will be retained by the lender to cover some of the loss.
7. Consult your accountant regarding tax implications of a short sale. The forgiven debt may be considered income, and taxable by the federal government.
A real estate short sale is not the perfect solution for everyone, but it is an option. You need to way the pros and cons of your particular situation. For many, it provides for a faster economic recovery and could allow you more credit options and opportunities than you would have should you be foreclosed on. To learn more about your options call 1-888-For-You2.
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