Homeowners facing foreclosure are in a difficult position. Many homeowners that are behind in loan payments (are soon to be behind) do not have the good credit necessary to refinance the mortgage or modify the loan agreement. If the homeowner can sell the property, he or she will be able to avoid foreclosure but will still lose the home. In some cases, homeowners are upside down in their mortgage, meaning they owe more than the property is really worth. If the homeowner were upside down in the mortgage, he or she would have to bring money to the table to sell the property. The sale price might cover the balance of the mortgage, but not the closing costs, realtor commissions, and repair costs. Most people facing this problem do not have the cash necessary to sell the property. In this bleak situation, homeowners have one option remaining for avoiding foreclosure. A short sale occurs when the lender accepts less than the balance of the mortgage to sell the property to a new buyer. The homeowner benefits from a short sale in many ways. For instance: Most homeowners do not have to bring any money to the table to sell the home in a short sale Some lenders will waive the right to a “deficiency judgment,” which means the homeowner cannot be pursued for the short fall in the future. The homeowner is able to avoid the damage a foreclosure causes to his or her credit score

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Steps to a Short Sale
-Be prepared for the process. Patience and diligence will be your allies and impatience can be your nemesis. Understanding the process will help you through it. The lender will not be rushed. Your experienced buyer’s agent will know how to manage the offer and the correct parties to work through.
-If you are not submitting a cash offer, ask your real estate agent about financing options. The lender may be in a position to permit a loan assumption and modification for a qualified new purchaser, or they may be able to offer new mortgage financing. The more steps that you have completed when you submit an offer, the better chance you will have of a quicker approval. Have your lender’s loan application, information and requirements prepared. The lender will provide you with a package with their forms and requirements. Rely on your buyer’s agent to assist you. There will be a substantial down payment required to have your Agreement approved. Other than for property inspections, there should be no contingencies in your offer. If you have to sell an existing home first, it is unlikely that a short sale will be approved by the lender. Line up your ducks. The more steps you have completed, the easier the process and the approval. Quick and clean will get you to your closing. You would be surprised at how many things don’t end up in the right hands when they float in one at a time. The fewer times that the file has to be handled and the more complete the documentation from the beginning of the process, the better the result.
-The lender will most likely want the property sold “as is.” They will not be motivated to deal with complexities in the contract, particularly since they are selling at a distressed price. These require too many decision points and details that can hang up the approval. Buyer Beware: it is important to protect yourself. Have the property inspected. All the home’s key systems should be checked out. Structural, plumbing, electrical, heating and air conditioning, fire place, swimming pool and equipment, roof and mechanical should be checked. If you are buying “as is,” the risks assumed will be yours. If you have any concern, be sure that the home is checked for pest infestation, hazards such as, asbestos (if the home was built prior to ’85), lead paint (if built prior to ’78), and radon gas, particularly if it has a basement. If you have reason to believe that the area may be in a flood zone or known hazardous or toxic waste area, have it checked out. The title commitment will indicate if the property is in a flood zone. If you have concerns discuss them with your agent. A short sale is like any other real estate purchase, surprises after the closing are avoidable. Most of these items should be covered in the standard local board of realtor purchase offer Agreement. It they have to contend with a lot of complexity, they will probably just as soon that the property proceed to foreclosure where they have a process established.
-Make sure that a legitimate hardship exists on the part of the seller. Don’t waste your time with a seller that is testing the water. The lender won’t approve a short sale unless a legitimate financial hardship exists. To qualify, the seller must be behind in their mortgage payments and unable to make future ones. In other words, if the lender does not approve the short sale, they are foreclosure bound. The lender is doing whatever they can to recover as much of the outstanding loan balance as possible; however, they need approval from the investor that owns the loan and any inferior lien holders before they can proceed.

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In the event that you have not been able to get all of the debts that you owe on you property paid off in an appropriate period of time you will be forced into a repossession process. It will be very important to understand the four steps that work with this important process. The first step involves being reminded of payments that you will have to make. This works in that the creditor that you have to pay off for your property will remind you of the late payments that you have failed to make on your property. These payments will have gone in arrears as late payments that you owe in accordance with the law and you will need to pay them off in order to make sure that the repossession process does not continue. This is generally considered to be the best time for when you will be able to pay off your debts without being put at risk of being removed from your property. The second step deals with a letter from the solicitors that can come after you have not gotten any of your arrears from the first step taken care of. This works in that your information with regards to the arrears that you owe and have not been able to pay off will be sent out to solicitors that will force you to pay back the money that you owe in a short period of time. If you fail to pay off your arrears then you will end up having to go into court in that a possession order will be filled out by the solicitors. At this point you will be forced into the third step of the repossession process, the court hearing. Court proceedings work in that a judge will hear all claims that are between you and the lender that you owe money from your property to. This includes information with regards to what you owe and whether or not you have made some kind of effort to try and get your money debts paid off in a reasonable amount of time. In many cases you could be able to work out a plan that can be used to help with getting your arrears paid off through a court ruling. However a suspended possession order can be filed to where you would end up having your property repossessed without any court hearings in the event that you are unable to pay off those debts.

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