Contrary to what the title suggests, a short sale does not have to take too long to sell a property. It all comes down to the selling price. When homeowners are in financial distress and sell their home for less than the mortgage owed, it is called a short sale.
Short sales are often misunderstood and not explained properly. This article will help to understand the short selling process and how it works.
What Is There a Difference Between a Short Sale or Foreclosure?
First, a foreclosure does not necessarily mean a short sale. A short sale is initiated by the homeowner. To make a short sale possible, the homeowner must make the property more valuable than the mortgage owed. This means that they have to be late on their mortgage payments, and can’t catch up.
If the buyer cannot pay the mortgage payments, the bank will take the property. The foreclosure process is initiated by the bank and not the homeowner.
The lender will ask the homeowner to sell their house in order to get the loan amount back. Although most foreclosed homes are abandoned, it’s possible that the homeowner is still living on the property.
The Benefits of a Quick Sale
A short sale is more beneficial than a foreclosure because it’s voluntary. A short sale allows you to close your house sooner than a foreclosure.
How long do short sales take
Foreclosures are more common than short term sales because the lender wants the house to be sold quickly.
Expect to wait when you make an offer for a quick sale. Sometimes it can take weeks or even months before you find out if your offer was accepted.
Should my house be short-sold?
A short-sale might be an option if you feel overwhelmed. A short sale can result in the loss of property but a profit up to $0. The next step is to address the emotional stress.
A short sale is not the best way to sell your home. This option is only available to people who want to avoid foreclosure.
How to Qualify for a Short Sale
You should consider whether the lender is willing to lend a hand with a quick sale. A lender doesn’t have to approve a quick sale. They can decide whether they wish to proceed.
It doesn’t matter what situation you are in, gathering enough documentation to fill out a short sale application is possible. Insufficient documentation is often the reason short sales fail. It is best to arrange and provide all documentation in order to increase your chances of approval.
Hardship Letter
The hardship email is the most important part of the short sale kit. The letter should describe how you got there, the problems you solved and the reasons short-sales are the best choice. Include the loan number, date, and signature in your letter.
Evidence of assets and income
It is crucial that you collect all documentation required to prove your income to the lender. These documents could include bank statements and medical bills. Pay stubs. A termination notice can be obtained from your previous job or a divorce decree. You are responsible for the preparation of the short sale proposal.
After receiving all details, the lender will either accept or deny a sale. You will need to find the buyer.
Liens
Documentation of additional liens, such as unpaid taxes or homeowner’s association dues, will be required. You will need to get all creditors to let go of your lien as part of the short-sale process.
They might agree to make arrangements or pay the entire amount. You might be able to accept a loss from some lien holders (e.g. the CRA) and have the lien canceled due to financial hardship.
Comparative Market Analysis
Your agent can request a comparable market analysis if you are concerned that your bank may reject or counter your offer. To help justify the price, the CMA compares active and expired listings.
Three estimates are required for any home repair. The bank will always select the lowest estimate.
How to Buy a Short-Sale Home
These are the most important points to know if you want to buy a house for a quick sale or plan for when you will.
Locate Short-Sale Properties
Some real estate sites have short sale listings. Others may need more digging. Look for phrases like “Subject to bank approval” or “Give bank time till reply”. This will help you determine if the property has been sold.
A real estate agent is a great resource if you are looking to buy or rent a property. Agents are often knowledgeable about these listings and can help with certifications.
Do your research on renovations and repairs
The property will have a different cost for repairs and renovations. It’s worth spending the time to create a realistic budget. This will help you determine your financial capability to purchase the property.
Remember to include labour costs in your calculations. Also, storage costs, inspection fees, and permits should be considered.
Always do a home inspection. It is tempting to rush and not inspect your home as thoroughly as you would for a regular sale. This is a huge mistake. You have the time and resources to inspect your property. It could prove disastrous.
Identify Mortgages and Liens
Ask the seller or agent about any liens attached. Which lender holds the primary lien on the property?
A title search can be used to verify the information before you close the deal. This will verify that there aren’t unreported liens.
Find out how to finance your house
A short sale can be possible if you are able to move quickly. A financial plan is essential. An existing lender might be willing to lend you money if you have excellent credit. They may have additional paperwork. This can help you speed up your loan application.
Lenders might require closing within 20 days of the agreement being signed. It would be almost impossible to obtain a mortgage.
Reach Out To A Lender
Your agent or you should contact the lender’s loss mitigation team rather than the collection service and service departments. These departments are only concerned with past due loans payments.
In this short sales process, it can be difficult to identify the decision-maker.
The homeowner must sign an authorization form and return it to the lender. This authorizes the lender to access your mortgage situation.
Register through Your Chosen Lender for the Short Sale
To approve a short sale request, most lenders will require that you complete a specific application. Find out what your lender requires if you don’t require a specific application.
Send a proposal
Your proposal will typically include your authorization letter and application.
You can negotiate the sale and close your home.
Lenders might reject your offer. Don’t be discouraged if they reject your offer. They might counteroffer. You should establish your absolute threshold to allow you to walk away if it is not met.
Selling or buying a short-term property can be time-consuming and difficult. Before making major decisions about the sale or purchase of a short-term home, do your research. Prepare all paperwork and ask the right queries.