One would think that the massive number of recent foreclosures, and the money it costs a lender to foreclose, would make a short sale offer very appealing to the bank. Alas, that's just not the case. One recent report stated that less than one in five short sale offers ever make it to closing. It's probably higher, as many failed deals are never reported. One problem is the delays encountered in working with stressed-out lender asset management departments. They have been staffed to make loans, not work their way out of bad ones.
These delays in processing paperwork and exchanging information result in buyers walking away. Facing the facts, they're looking for a bargain, and worry that taking too long to buy your home might cause them to "miss the market." Many failed short sales result from the buyers giving up, sometimes after months of back-and-forth with the lender. So, if you're going to try to take the short sale approach to extricating yourself from a troubled home loan, here are some tips to make sure that there is a chance of it working in your situation:
Is Your Home Even a Viable Candidate for a Short Sale?
If you're very far "under water" on your mortgage, it may not be. Offers from investors are going to come in at or more likely well below the current market value of your home. If you owe a lot more than that value, it can look much better to the bank to go ahead and foreclose, thinking they can list it in the retail marketplace and do better, even after the costs to foreclose. They're already showing losses on their books, but showing a home in inventory worth $200,000, and for sale for more, may look better than taking $150,000 for it in a short sale. Get a realistic number for the current value of your home, as you'll need it anyway to move forward with a short sale proposal.
Decision Delay Makes It Harder
Humans have a tendency to postpone difficult decisions or distasteful situations. The sooner that you realize and admit a problem that could lead to foreclosure, the better. With delays and discouraged buyers leaving, it's easy to see that more time makes a short sale more viable. Even if you're not late on a payment, but you know it's coming, start looking into this possibility. You've nothing to lose, and the next steps could take a while anyway. Delay has no positive influence, so begin to take the following actions as soon as you believe that there could be a foreclosure in your future. Of course, you may have been trying to sell your home already, and the assumption is that it isn't possible due to the value versus what you owe on it.
Locate One or More REAL Buyers
A real buyer with a contractual offer to purchase is the only way you can hope to get any interest from your lender. Here's a real opportunity for the bank to get out from under your loan before things get worse, so get one or more buyers, using backup offers for those after the first. If you're calling on any of the "We Buy Houses" ads or signs, be careful not to get locked into a deal unless you know your home's value and you've tried to advertise it yourself, even if only to family and friends. Desperation can cause people to jump at the first solution, when there may be other buyers out there willing to pay more. Get the very best offer or offers you can before deciding on the one to submit to the lender.
Get Your Paperwork Ducks in a Row
This step is critical, and will need to be done even if someone approaches you with a short sale offer out of the blue. The common term is "short sale package" for the documents that you will need to submit to the bank or lender to make a short sale happen. First, you'll want to get the help of a Realtor or someone in gathering sales information for homes comparable to yours in the immediate area. You need to present a case to the lender that the offer you're sending is their best and quickest way to avoid a foreclosure action. Showing them that your home has little or no chance of selling for more than the offer you're sending in the short sale package is a good start. Do this with actual data and documents showing list prices of homes that aren't selling, days on market, and the low prices that were received for homes like yours recently.
Gather every single expense item that you have, all debt documents, and any paperwork that shows your monthly expenses. If you owe medical bills, they're important as well. Though you aren't necessarily considering it, if your expenses clearly show that you'll not be able to continue to make your mortgage payments, the lender may assume that bankruptcy is a possibility. Your short sale offer, with a fast closing, may look much better than waiting for you to miss payments, mailing delinquent notices, and going through the foreclosure process. If you file bankruptcy first, the lender may have more hoops and expense. Write a cover letter telling the lender why you are doing this, and indicating enclosed documents that support the urgency of your situation.
Submit and Followup...A Lot
Now we have a purchase contract and all of our documents complete in our short sale package. We contact our lender and get a person's name and precise address for submitting the package. And, submit copies, not original documents at this stage. They may want some originals later, but don't trust them to anyone now. It would help if in your first contact phone call you ask when you should follow up. But, never feel timid about checking with them on the progress (or lack of it) in moving your short sale through their system. Practice the three "Ps," Polite, Professional and Persistent. You'll wonder at times if they even care, but it's just bureaucratic systems, so keep at it.
A short sale could be the answer to your mortgage problems. But, it's not a process to treat lightly. Follow these short sale tips and good luck!
James Kimmons - Business Technology and Marketing Writer Writing for business, particularly on the Internet, requires the ability to get to the point, ...
