Mortgages
The Real Estate Short Sale Process in the U.S.
Here’s an article for our US audience…
The United States’ economic conditions are wreaking havoc on the average citizen, and countless people are the brink of losing their homes.
The situation is so fragile, that many lenders are finding too many of their homes in a state of foreclosure. Because a financial institution loses quite a bit of money above and beyond the mortgage balance when a foreclosure occurs, a real estate short sale can be an ideal solution for both the homeowner and the lender in an otherwise negative situation.
Short sales aim to allow financially strained homeowners that cannot meet their mortgage obligations to avoid the stigma attached to a foreclosure on their credit history. Lenders that ultimately approve these sales agree to take an amount less than the remaining balance on the property. Persons that receive approval for this type of agreement may find that the sale of their home leaves a deficiency regarding the balance owed to their lender. Depending on each state’s regulations and the contractual status of the abode, this amount may still require repayment to the financial institution.
Procedures involved in a successful short sale, are to some extent complex, and getting a lender to agree to the terms can be a challenge. The home’s value will be substantially less than the amount that is still outstanding to the financier, which is known as being underwater. When the value of the home is less than what is owed, lenders are much more likely to agree to the terms of a short sale, as this helps them recover some of their initial investment in a timely fashion. The process of foreclosure can be lengthy and costly, and underwater homes are prime candidates for a short sale.
Americans applying to their lender for permission to utilize a real estate short sale must provide documentation that exhibits their inability to pay, as opposed to their unwillingness to do so. Copies of bank statements, paycheck stubs, and tax returns are essential to include in a short sale application package. Providing this information to the lender gives them a solid overall picture of the defaulting party’s financial situation.
Often, a borrower has a situation such as a job loss, divorce or the death of a spouse that has contributed significantly to their current finances that have led to their inability to meet their mortgage obligations, and sending in copies of unemployment benefits, a death certificate or decree of divorce will lend merit to their case. The real estate slump in the U.S. has led to many people attempting to sell their homes at full value prior to reaching the point of requiring a short sale, but to no avail. If this is the case, sending in this documentation is a way to show a lender that these attempts were unsuccessful, but made in earnest.
Persons that receive approval for this type of agreement must ultimately be able to find a buyer that will purchase home rather quickly to finalize the deal. This is one reason why many Americans seek out a professional realtor to assist them throughout the process. Professionals in this field that are HAFA (Home Affordable Foreclosure Alternatives) or SFR (Short Sale and Foreclosure Resource) certified are extremely beneficial to borrowers attempting to pursue a short sale.
These experts assist individuals with all of the paperwork and detailed procedures involved in successfully submitting an application to a lender. Additionally, it is wise to try to find a buyer for the home while the application is in the review process, because upon approval of the deal, a sale typically needs to take place within 30 days. Realtors will take care of this aspect for the homeowners, as well as attempt to help them avoid financial responsibility for any financial deficiency that may result from a real estate short sale.
Between the financial crisis and the real estate slump that has been plaguing the United States for years, short sales are becoming a viable alternative for Americans in financial trouble. In retrospect, many home seekers are able to find great homes at affordable prices through these deals, and only time will tell how this situation fares for the country as a whole.
Guest post from Tracey Louis. Tracey has invested in real estate in several Southwestern states and been actively involved in the California foreclosure market for several years. She likes to track and write about changing market conditions.
