The Short Sale Process from Start to End
The Short sale is the sale of property when the owner falls short of the balance remaining on the property’s mortgage loan. This happened after 2008 where homeowners found themselves in a situation where their property value fell, making it nearly impossible to refinance or sell their home. Buyers are well benefited from a short sale because they get home at a lower price as compared to a traditional sale. Sellers opt for short sale over foreclosure because foreclosure can be a lengthy and expensive process. Moreover, it can create a negative impact on the owner’s credit. The increased popularity of short sale provides a wealth of opportunities to an investor. In this article, you will learn about the components and process involved in short sales.
1) When does Bank grant for short sales?
Bank grant short sale basically for two reasons: The current owner of the property is several payments behind and has insufficient resources to pay the obligations. When the seller is experiencing a hardship like unemployment, divorce, a medical emergency, bankruptcy or death. The seller must prepare a hardship letter (along with the financial package) stating why you can’t repay your mortgage loan and submit it to short sale Bank.
2) The financial package
The seller’s short sell package consists of:
- A Hardship letter
- A closing statement
- Two years tax returns
- 30 days payroll stubs
- Two months of bank statement
- A completed financial statement or RMA
3) Submit a short sale offer to the bank
Compare the prices to the market value before writing a short sale offer. However, the property must be priced below comparable sales in order to increase multiple offers. Banks will most likely start the procedure upon receipt of an accepted purchase offer. After the seller accepts the offer, the listing agent will send the required documents to the bank.
4) Response from Bank
It may take 2 weeks to 3 months for a bank to response on a short sale. You must keep calling your listing agent regularly and ask about the progress. After revising all the submitted documents the bank will issue a short sell approval letter. You can read more about the short sale in short sale blog.