How to do a Short Sale
Are you thinking you need a short sale? If you are selling a home in Arizona, chances are good you are, as about a quarter of our sales are being done that way. A short sale is necessary when sale of the property will not generate enough proceeds to pay off the loan. As a result, lender approval is required. Without such approval, the only choice of a home owner that wants to move is to let the home go into foreclosure.
One reason why you might want to short sale your home and avoid a foreclosure was discussed in an earlier blog – the lesser effect on a credit score of a short sale verus a foreclosure. Another of my blogs pointed out that a foreclosure could prevent you from qualifying for a loan insured by a governmental affiliated entity. Since the overwhelming amount of loans made are FHA, Fannie Mae and VA, this could prevent you from getting a loan altogether. A short sale avoids this result.
So a short sale makes sense, but how is one done? The particular bank drives the process of course, but due to the volume of metro Phoenix short sales and the federal programs (such as HAFA), the requirements go like this:
First, inform lender/bank’s “Loss Mitigation Department” (a.k.a. Asset Management, Asset Recovery, Workout, or Problem Loans Department) and get the lender’s short sale packet. You can do this as soon as you know a short sale will be needed, or let your real estate agent handle it when the home is listed. You will need to sign a written authorization to provide the listing agent with permission to speak to the mortgage holder(s).
Second, gather the required documents: The short sale packet will require that the seller submit W-2s, 1099’s, or a letter explaining why the seller is unemployed; bank statements (usually for 3 months); two years of tax returns; and financial statements that depict the owner’s current income and expenses along with a statement of their personal assets and liabilities and other financial documents outlining income and debt obligations. Also required is a “hardship letter,” explaining the events that have led to the circumstances that make it impossible for the owner to pay the full amount of the loan. Hardship that can include: divorce, costly illness, involuntary job loss, or being a total moron.
We can help you jump through the lenders hoops so your short sale runs smoothly. Contact Lisa Brazky if you have questions. She has done multiple short sales and will help determine whether you need a short sale. See our short sale document page on our website www.simplysoldaz.com.
– N. Mark Kramoltz © 2015