A ‘Short Sale’ is in essence a discount that a mortgage Lender is willing to accept off of the original balance of a loan (mortgage) encumbering real estate. Lender(s) will typically consider a short sale on properties that have little or no equity and are either behind in payments or in imminent danger of being behind.

In order for banks to consider a short sale, they require the same paperwork as they would if you were applying for a loan.  In addition to this, a case must be built as to why the home is not worth what is currently owed and the documentation must prove that the sellers no longer have the capacity to afford their mortgage payments.

When Lenders consider a loan applicant (when an individual wants to buy a house, or refinance) or a short sale file (when a homeowner tries to sell their house for less than what is owed) they look at the three P’s: People, Paper, and Property.

People- pertains to the homeowner that no longer has the ability to make the payments on their home.  The lender will be evaluating their current situation, current property value and reason for default (RFD)

Paper- pertains to all mortgage documents originally signed when you purchase or refinanced the home.  Lenders must follow the guidelines on how and when these loans can be discounted.

Property- pertains to the current market value and the amount of equity (or no equity) in the property in which the mortgage is secured against.

The idea of the short sale is to prove to the foreclosing mortgage company that the ability to pay the mortgage (people) and the value (property) have been damaged enough that the seller cannot recover and subsequently must sell the property.

It is important to keep in mind that the mortgage lender considering a short sale will always look for a “good” Reason for Default (RFD). Loss Mitigators who work for Lenders need to have a valid RFD to prove that the Homeowner is indeed facing significant hardship.  One point to remember is that the RFD does not necessarily mean that the seller needs to be late on their payments yet.  An RFD is simply the story of hardship that the seller is facing.  We have worked on a number of successful short sale transactions where the Seller was not yet late on their mortgage and still had great credit.

The Hardship Letter is a handwritten letter from the Seller to their Lender(s) explaining their current financial situation and explains their current hardship.  The Lender(s) read the hardship letter in order to find out the RFD.  The hardship letter is a very important component of the short sale package that we submit to the Lender.

Foreclosure are extremely expensive for mortgage Lenders.  Lenders are not in the business of owning real estate, they are in business of lending money and making interest. Federal guidelines require Lenders to reserve money for all nonperforming assets such as loans in default and foreclosures.  Typically Lenders would prefer to cut their losses and take a discount rather than to continue losing money on a bad loan.  On average,  it costs Lenders over $80,000 per house that they repossess through foreclosure.

You can please fill out your house info at: www.wecallyourbank.com

  • Share/Save/Bookmark

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.