The short sale is a very good tool to be used for two reasons: extends the foreclosure process for many months and saves the homeowner from a public (foreclosure) sale. It appears that short sale is a good solution if the homeowner wants to keep the house and also if he wants to sell it. It works perfectly in both cases. The biggest challenge people have is preparing the short sale package. It is important the package to be put together correctly. Usually, the lender sends a list of items needed for the package. And if something is missing, they will send a letter requesting the document. I think that sometimes is a good idea to miss something. It can add one more month to the process. Any communication with the bank buys more time for the homeowner.
Now, back to the package. The items that need more explanation are:
-The buyer. As a homeowner who wants to initiate a short sale, you must find a buyer. (In my opinion, real estate agents are not the best choice). You can look for a buyer in the local newspaper. Find ads that say: We buy houses. Those are investors looking for a deal. You can also ask friends and relatives if someone wants to become your buyer. You need two things from the buyer: executed purchase contract and pre approval letter from his future lender.
-The hardship letter. It is a free text letter to the lender explaining what happened to you. Make the letter emotional. Tell your story. Extend on the reason why you are experiencing the hardship. Describe the condition of the house (may be you were not able to keep up with the maintenance and repairs). Do not ask anybody else to write this letter for you. You have to do it yourself.
-The preliminary HUD. This document is prepared by the closing agent (title company). It describes the real estate transaction and shows the lender how much they are going to net. In the short sale transaction the lender pays the closing costs in behalf of the seller. For example, if the contract is for $100,000 and the closing costs (together with junior liens pay off) are $10,000, the bank will be interested in the net amount, which is $90,000. Find a local title company and promise to close with them. They will prepare the HUD for you (for free, because they will get your business).
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