In a bad economy, the housing market slumps and lots of homeowners find they are”upside down” in their houses, meaning they will owe the bank money after selling the home since the mortgage balance is larger than the residence is worth. In these cases, the homeowner is faced with the possibility of a foreclosure. A short sale, where the lender agrees to forgive the debt in order to market the house to somebody else, is becoming the next exit strategy in such circumstances.
Hire a real estate agent who is experienced in short sales to act as your own trustee. Sign an”Authorization to Publish” with this broker, which will permit the broker to act and negotiate in your behalf with the lender.
List the house to the market at market price. Pricing your property too high to fit the sum of debt owed will likely result in having no offers. Pricing the house too low to get more buyers may wind up with the lender rejecting the deal because its loss will be greater than necessary. Take all offers in your house and create a sales contract, but do not include the final price and commission rates, because these may change throughout discussions.
Write a hardship letter to the lender indicating why you cannot continue to honor the mortgage you have on the home. Describe how your circumstances have changed (e.g., laid off from work, medical bills, divorce, etc.), and make clear that these circumstances are unlikely to improve in the near future.
Put together a short sale package with the real estate agent. Include within this document a industry analysis justifying the selling price of the house, comparing your home with other houses in your own market. Include photographs within this package to help justify the pricing. Also include the sales contract, together with all additional information regarding the buyer who has made a deal on your property. Include all financial records into this package for the lender’s consideration.
Call the lender’s”Loss Litigation Department” per week to prevent the lender from dropping the ball, which may lead to foreclosure proceeding. There have been cases where the short sale was approved just days after the home was foreclosed. Being always in contact with the lender and insisting on approval will greatly expedite the process, leading to approval.
