Wednesday, May 2, 2012

In Dire Straights and Need a Short Sale? (Part 1)

It seems like more and more short sales are coming on the market. Are they here to stay? If not, they're here for a little while, at least.

Because foreclosures are already owned by the bank, the buyer (or buyer's agent) is dealing directly with the bank. Short sales, on the other hand, are quite a bit different. They are not owned by the bank.

Short sales can happen at any point. If the seller is upside down in his/her mortgage and needs to sell the home to move away, then the short sale process can begin even though a seller has never missed a payment. If the seller is behind in his/her mortgage payments, then the short sale can occur within just a month or two into that situation, or it can occur later on. The third situation for short sales is when the seller is upside down in his/her mortgage, and is also behind in payments. Some short sale properties are candidates for foreclosure.

While this blog article is about short sales, let me mention a few things about foreclosures: (1) Tennessee law allows for a bank/mortgage lender to foreclosure very easily. If a seller is behind even one month, then the lender has to give notice of a foreclosure sale three weeks in a row in a public forum (i.e. newspaper) to be able to foreclose. (2) Banks are NOT in the real estate business and do not really want to be. Taking a house/property back so they can sell it again is NOT in their best interest. (3) It costs a mortgage lender approximately $40,000-$50,000 to foreclose on a property. Foreclosure is a legal process that takes the home away from the borrower because of non-payment, and banks always lose in this process.

Every short sale is different. Things that determine the situation are: (1) How far behind the seller is in his/her mortgage payment; (2) The type of loan the seller has on the house; (3) The mortgage investor and what their policy on short sales is.

If you are behind in your payments, NOW is the time to contact a real estate agent. Don't wait! Your agent will give you all of your options!

If you decide on a short sale and have a good agent, the first thing the agent will do is draft a third-party authorization letter which you need to sign in front of a notary public. That letter should contain the loan number, the address of the property in peril, the bank name and address (where the monthly payment is sent), and the social security number of the borrower(s). This needs to be done immediately so the agent can get on the phone with the bank to find out where this house is in the process and what can be done at that point.

The agent will contact the bank to find out where to fax or email the letter. Once that is taken care of, usually a week later, the bank will communicate with the agent when the agent calls.

Part 2 on Short Sales will be posted tomorrow.

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