Short Sale Basics

A “short sale” differs from a traditional sale because the owner is trying to sell the house for less than is owed on the mortgage, rather than go into foreclosure. There are ever-changing rules and numerous potential land mines in the short sale process, making it essential to work with a REALTOR® and an attorney who are experienced in short sales - from the very beginning.
Today, banks and mortgage companies are being flooded with short sale applications from struggling homeowners. An incomplete submission to a lender’s Loss Mitigation Department will likely be relegated to the bottom of the stack, so that getting timely answers becomes nearly impossible. However, with expert guidance, you can avoid this problem. 

If you’re considering a short sale, here’s how to begin:

• Find a REALTOR® who is familiar with the often lengthy short sale process and can recommend a qualified attorney. Your house can be listed while you are in the process of applying and being approved.
• Obtain an ‘Authorization to Release Information (ATRI)’ form from your lender. This authorizes the lender to talk to your designated representatives. 
• Write a detailed “hardship letter” stating what has led you to the point that you can no longer make the monthly payments.
• List assets, debts, monthly income from all sources and monthly expenditures.
• Collect financial documentation, such as tax returns, bank statements, and pay stubs.
• Consult your accountant for advice on the tax implications.

Remember, the lender decides whether or not a home qualifies for a short sale.

In many instances, a short sale is preferable to a foreclosure, for both the lender and homeowner. Generally, it costs the lender more to process and maintain a foreclosed property than to agree to a short sale and end the procedure. A short sale has less negative impact than a foreclosure on a homeowner’s tax status and credit rating. A word of caution: A closed sale might not relieve a homeowner of the obligation to pay the difference between the sale price and the loan balance.

A short sale is a  difficult, complex, lengthy process, with ground rules that change frequently. Make sure you work with knowledgeable people.

Smart Selling Tip:
Because of numerous potential land mines in the short sale process, it’s essential to work with a REALTOR® and an attorney who are experienced in short sales - from the very beginning.