Right now there are many short sales (pre-foreclosures). If you are considering doing a short sale, read on.
A short sale occurs when the value of the property does not pay off the debt. The bank then will be 'short,' receiving less than what they have lent.
Good news/bad news.
The good news is short sales are survivable. I give hope to all my clients by telling them that it isn't the end of the world...though it may seem like it for some. The banks are not going to shoot them, jail them, take their children...nothing dangerous like that. Borrowers will survive.
The bad news is that the persons will have to go through many months of not having credit. Or be able to buy another house. Some say this can take two years, some say five years.
Below are some of the documents banks are requiring:
- Letter of Explanation/Hardship
- W-2s, last two years
- Pay stubs, most recent
- Income/Expense List
- Unemployment, if applicable
- Disability, if applicable
Your realtor will need
- A letter of authorization, and the last four digits of your SSN. Without your authorization, banks can not release private financial information
- Pest/Termite Report, seller cost
- 3 R Report, if residential income property, i.e., multi-units, seller cost
- Full disclosures
What a realtor would like to have
- A vacant property. (Or at the least plenty of access to the property.)
- A clean property
- A decluttered property
- Repairs to minor property damage
- Utilities on
- Full commission
- OK to put a sign and sign post
- OK to put a lock box
Your realtor will provide the bank:
- Letter of Authorization
- Listing Agreement
- Purchase Offer
- HUD-1/Net Sheet, showing how much the seller's bank will net.
Things that sellers don't quite understand:
- Sellers can pay real estate fees
- Sellers can pay for county and city transfer taxes
- Sellers can pay for any real estate related fees
- If there are two loans, seller can pay off the second, usually for much less.
- Sellers should keep paying their property taxes
- Seller should keep paying their home insurance
Why pay some of the above fees? Anything that saves the bank money, is an incentive for the bank to approve the short sale.
The other thing sellers have to be aware of is that short sales take a long time to close. So, patience, patience, and more patience is the order.
Short Sales Video
(All comments are an opinion only, as I am not a real estate lawyer.)