Short Sales

HOW TO SELL A HOME FOR LESS THAN YOU OWE FOR FREE (SHORT SALE)

Most people that bought a home in the last 4 years owe more than their home is worth. Actually, I would bet that everyone who bought their home in that time period with less than a 10% down payment owes much more than their home could sell for.

So what can a potential home seller do about it?

A homeowner can sell their home for less that they owe without paying a penny at the close of escrow. Its called a short sale.

In every case I’ve seen a homeowner has to be  delinquent on their mortgage payment in order to be eligible to negotiate new terms with their lender(s). So if your mortgage is current you’re stuck, and if you really can’t afford your mortgage payments then you’ll be delinquent soon enough and be eligible.

Short sales are simple by process and principal, yet there will always be catches and curveballs. In addition to following the steps of the process, extreme persistence and resourcefulness are essential to make it work.

The first step would be to open up the line of communication with the lender(s) of any mortgage liens on the home. Make them aware that you will be submitting a short sale offer. Verify that the lender(s) does cooperate on short sales (almost all do), and request all pertinent forms. The lender(s) will send you a checklist of items they need. The list usually includes a personal financial statement, tax returns, bank statements, a HUD statement, and possibly other items depending on the lender(s).

Run a comparative market evaluation of what homes similar to yours are selling for and decide upon a fair selling price at market value. Once you have chosen a price that will procure an offer within 30 days, contact a title/escrow company, request a preliminary title report.

After you have received an offer that you’ve agreed upon, forward it to escrow. You will then ask escrow to prepare a HUD statement according to the terms in the agreement and any other liens found on the title report.

Gather all the forms and documentation required by the lender and fax it in.

Now you wait. This process can take weeks to month. I strongly recommend making phone calls to check status every 3 days. Your job at that point is to push the lender into doing their own appraisal. I cannot stress enough the importance of persistence. Call at least once every three days, and up to 3 times a day.

Eventually, the lender will order an appraisal. Once the appraisal is done it is then sent to the lender in order to review your offer. Stay persistent and within weeks you will get an approval or denial.

If the offer is denied, find out what the lender(s) bottom line is and give the current buyer an option to increase their offer or readjust the asking price to bring in a new buyer.

This is a very simplified view of the process, and although a seller could do all this without broker representation, the difficulty level would near impossible and the legal risks would be substantial.

The reason I mention “free” in the title is because a seller can hire a broker for the standard 6% and the lender(s) will pay the commission and the seller’s closing costs. A seller should not have to come out of pocket a penny in a properly executed short sale.