Short sale approval requires working with your lender’s Loss Mitigation Department. Getting approved for a short sale can be a long and complex process. It involves many steps and consists of a paper trail.
When lenders accept short sale approval transactions, they accept less than what is due on the mortgage balance. A Loss Mitigator is assigned to monitor your account and review your financial situation to determine if you are eligible to request a short sale transaction.
The following eligibility requirements will help you determine if you are a good candidate for short sale approval:
1) You must provide proof that your home is worth less than the unpaid balance. This can be accomplished by obtaining a comparable home sales report of homes sold or for sale in the area where you reside. Compensation reports can be obtained through real estate agents or by conducting research over the Internet.
2) You must be in arrears on your mortgage note for a minimum of three months. Also, most lenders will only consider approving a short sale if you don’t have equity in your home. If you have equity or financial assets that you can draw on to keep up with your mortgage payments, your lender may not approve a short sale.
3) You must provide proof that you are facing financial hardship due to hardships including long-term unemployment, chronic health problems, bankruptcy, death, or divorce.
4) You must show that you have no financial assets against which you can borrow to maintain your mortgage payments.
Before a short sale is approved, your lender will usually offer you a variety of options to save your home from foreclosure. Typically, this will include a Loan Modification in which the Lender will carry over past due mortgage payments to the end of the loan. Some lenders will temporarily reduce or suspend mortgage payments for a specified period of time.
There are several options available to homeowners who want to keep their home out of foreclosure. Each option comes with its own set of pros and cons. Before agreeing to a loan modification, deed-in-lieu, or short sale, it is critical to research all of your options and determine the best financial decision for you and your family.
Once you decide to go ahead with the approval of the short sale, certain elements must be in place. In most cases, your lender will require you to have a buyer lined up. This can be accomplished by working with a real estate agent or private real estate investor who is qualified to handle short sale real estate transactions.
A short sale packet must be provided to your lender. Although requirements vary from lender to lender, most will require the following information:
- Detailed financial statement describing income and expenses
- Short sale hardship letter explaining the events that caused you to fall behind on your mortgage payments
- Current bank and investment statements
- Tax return for the current year
- Real Estate Listing Agreement
- signed sales contract
- Estimated Settlement Statement (HUD-1)
- Proof of Buyer Financing
Participating in the short sale approval process requires patience, tenacity, and organizational skills. Expect to engage in multiple phone conversations to reach a final agreement. Most importantly, don’t provide false information or try to sugarcoat your financial situation.
Short sales are much less damaging to your credit and less traumatic than the foreclosure process. However, participating in a short sale approval will not allow you to keep your home. It just allows you to sell it and move on with your life.
It is highly recommended that you fully educate yourself about the short sale approval process and work with qualified individuals who are well versed in this type of real estate transaction. Short sales experts include real estate agents, real estate attorneys, short sales specialists, and private real estate investors.
