Short sale is a complex process, involves lots of paperwork and time consuming to complete a successful short sale closings. Short sale helps both the lender and the homeowners. So, if you are facing foreclosure and cannot afford your monthly payment then consider doing short sale to avoid foreclosure from your credit. Short sale will affect your credit but you can rebuild faster than foreclosure.
I have just divided into 3 different stages, just for simplicity to define what are the major things involved in a short sale process.
Before Short Sale
Before doing short sale, consult with your CPA or attorney for any tax ramifications. If it’s primary residence then you don’t have to pay tax on your cancelled debt under Mortgage Forgiveness Relief Act 2007, but make sure you consult with your CPA for any tax questions.
Hire an experienced short sale agent who has experienced in closing short sales or certified in short sale who knows how to negotiate with lender and how to submit the full package to the lender. Working with an experienced short sale agent will make your transaction smoothly and that agent will take care of everything during the short sale process.
Get all the required documents which need to submit to the lender with the short sale package. If your loan is Fannie Mae or Freddie Mac, then your lender has different requirements, call the lender to find out what all documents they need and criteria for short sale. Your agent can also help you to find out the requirements for you or tell you how to proceed with the short sale.
Write a hardship letter, you need to explain what caused you to have in this situation and why you cannot afford the payment. You don’t need to write very long letter, but just one page explaining your reasons for this financial difficulties, it may be because of unemployment, income reduction, increased your payment where you cannot support with your current income, death, divorce anything which caused this financial hardship.
During Short Sale
Once you consulted with CPA, attorney and hired the experienced short sale agent, the agent will list your house on the market and the agent will market your property to get the buyer. You need to cooperate with the showings and submit all the required documents, as it is to your benefit only for a successful short sale closing. It is to your benefit only by giving all the required documents on time. Once you get the offer, the agent will submit the offer and negotiate with your lender for approval. The negotiation part will take time so have patience.
Your lender will do an appraisal or BPO to check the market value and to see whether the submitted offer is good enough according to the market, if yes then they will send it to their supervisor or investors for their final approval.
Once you get the approval from the lender and you have agreed with all the terms and conditions, the buyer will do their professional inspection, the buyer’s lender will do appraisal in order to approve the buyer’s loan and once all these done, everybody is satisfied with all the inspections and appraisals, then they are ready to move in at the specified close of escrow.
You can start looking for rental unit if not, once you get the approval from the bank or once the buyer removed all conditions so that you can move out at close of escrow. It would be nice to give them in clean condition so that the buyer can move in with no problems.
After Short Sale
Once everything closed successfully and you moved to rental apartment or to a relative’s house then start building your credit by paying everything on time, you can also contact credit restoration company if you need any help to build your credit and live a peaceful life.
You have not only avoided the foreclosure from your credit, you have saved yourself all those harassing calls from the lender’s collection department and saved your community from bringing the house value further down with a foreclosure. So, no doubt that you did a good job on your part by doing short sale rather than forecelosure.
Don’t look at the past and worry about what happened. I know it’s sad and it shouldn’t happen to nice people like you but there’s something in your life which you cannot control, so think about what you can control, support your family, enjoy your life, count your blessings, pray and build your future.
One of the good things about successful short sale is that you can buy another house in the next 2 years, according to Fannie Mae guidelines, you can qualify for another loan in just 2 years.
If you have any questions about short sale or would like to sell your house in the bay area then please don’t hesitate to contact me, I would be more than happy to help you. Even your house is outside of bay area or anywhere in US, I can refer you to a good short sale agent in your local area.
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{ 2 comments… read them below or add one }
Thanks for posting about this, I would love to read more about this topic.
Thanks Joan for the comment! I will keep adding more blogs on this short sale topic.