Everbody Benefits From A Short Sale
A short sale or “pre-foreclosure” allows the seller to sell a property even though the NET PROCEEDS are NOT enough to cover the principle balance on the mortgage. It is a winning scenario for all parties involved.
It’s great for the buyer because the buyer usually pays under market value for the house. Typically when a realtor is marketing a short sale, they will usually market it under what the comparative market analysis value is. When giving a chance it’s not likely that the buyer is going to complain about saving money on their purchase. Banks don’t move as fast as you would like them to. So allow some extra time for acceptance of all offers and extra time to close this type of transaction.
The seller does well because they are able to rid themselves of a house that would have likely gone foreclosure if they hadn’t done the short sale. The sellers are able to get on with their lives and move to the next stepping stone in life. There are certain things needed before a bank will consider a short sale. All banks have different requirements but your agent should get a copy of the listing agreement, a copy of the purchase offer, a preliminary HUD 1 from the title company and a letter of HARDSHIP from the sellers. Banks WILL NOT consider a short sale unless you can document why they should allow it. Be creative buy never lie about the content of the hardship letter. There may be other documents necessary such as bank statements, tax returns or even net worth statements, as it varies from bank to bank.
The banks are in favor of it because they would rather sell it and take a small loss now rather than the house go foreclosure and take a big loss down the road. The last thing a bank wants is to foreclose on one of its clients houses. It’s not good for business. It gives the bank a bad reputation. Banks would rather you call them up and work out a payment program or possibly lower the interest rate to see if you can afford a lower payment OR proceed with a short sale.
All sellers should speak to a financial advisor before proceeding with a short sale to see how it will affect them financially.