Mortgage short sale refers to real estate sold for a discounted price to pay off the mortgage loan. When perfectly orchestrated, short sales provide benefits to all parties involved. Borrowers are released from their loan by selling their house. Banks recover most of their investment money, and buyers purchase properties below market value.
It is challenging to obtain mortgage short sale approval. Financial experts claim less than 20-percent of short sale requests are accepted. Many elements factor into obtaining approval. Not all borrowers or properties fit the criteria. Those that do will be placed under financial scrutiny similar to an IRS audit.
Borrowers should be prepared to provide pay stubs or unemployment benefit records, previous years’ tax returns, credit card and bank statements, list of income and expenses, loan documents, property tax statements and insurance information. Organize documents and place in file folders for easy access. Preparation and organization are key factors in obtaining a successful outcome.
Mortgage short sale transactions are handled by the bank’s loss mitigation division. Banks assign a loss mitigator to handle delinquent accounts. When short sales are involved, mitigators work with borrowers throughout the process.
The first step of obtaining short sale approval is to make contact with your lender. If you have received preforeclosure notice, chances are your assigned mitigator’s contact information is included. If not, ask to speak to someone in the loss mitigation department.
Each mortgage lender handles short sales differently. This can be a stumbling block for borrowers holding a second mortgage. In some cases, it is best to hire a real estate lawyer or short sale specialist to act on your behalf and negotiate with multiple lenders.
Most banks require borrowers to submit a letter of hardship documenting the events that caused them to become delinquent on their note. The short sale hardship letter is a crucial element in obtaining approval. The letter should be concise, yet detailed enough to provide good insight.
A mortgage short sale is your last chance to stop foreclosure. However, it is important to find out what type of short sale arrangement is offered through your lender. One can set you free, while the other can keep you in financial prison for years to come.
The first is known as Payment in Full without Pursuit of Deficiency Judgment. ‘Payment in full’ means lenders accept the sale price as repayment of the loan. The borrower’s credit will reflect the short sale for seven years, but they might qualify for another home loan within two years if they overcome their financial challenges.
The second type is the Deficiency Judgment. This transaction holds the borrower responsible for the difference between the sale price and loan balance. Deficiency judgments typically amount to several thousand dollars and are not removed from credit reports until fully satisfied.
There are many facets to mortgage short sales. If you are facing foreclosure it is imperative to contact your lender immediately and discuss available options. Facing the problem head-on is the best strategy. Take time to become educated about short sales and all they entail. Consult with short sale specialists or real estate lawyers to obtain guidance and avoid pitfalls.
