Many of my clients want to know what a short sale is.
A short sale, negotiated settlement, or short pay occurs when a lender agrees to accept less than the amount owed to payoff a home loan as an alternative to foreclosure. The lender usually agrees to a short sale because they know if they take the property back through foreclosure they are going to take a much larger loss.
The short sale negotiation process is a lengthy one! It may takes several weeks to months before a lender and home owner can agree on acceptable terms. Many lenders have layers of bureaucracy, insurers, and investors that the real estate professional will be responsible to oversee throughout the entire transaction. Plan on there being a continuous dialogue between the real estate professional and the homeowner.
Starting a short sale will not automatically stop the lender from starting the foreclosure process. The purpose of a short sale is to get the property sold. This is not a program that can stop a foreclosure and allow you to keep the house indefinitely. The home owner may stay in the home until the sale is complete.
If you are thinking about starting the short sale process for your home, you will need to contact your lender for a short sale application. Your lender will require financial information which may include the following: (2) Month’s bank statements; (2) Month’s pay stubs; (2)Years’ IRS tax returns. You will then contact your real estate professional to complete a fully executed listing agreement.
Lastly, completing a short sale transaction is an honorable exit to a difficult financial situation.