Short sales usually serve as the fallback of homeowners who owe more than the worth of their property. Some see the option as less than ideal, others think of it as the perfect solution. Could a short sale work for your situation?
Short Sale Summed Up
A short sale is when you sell your house at a lower price than its outstanding mortgage. It becomes an option when any or a combination of the following factors occurs:
- 100 percent financing
- Increased interest rates on adjustable mortgages
- Neutral or dropping house prices
- Home-equity credit lines
Before you sell your house under this transaction, you need to send a letter of hardship to your lender explaining why you can’t make your mortgage. The letter has to detail your financial situation and events that have led to your difficulties.
Realestatebrokersocal.com, a real estate broker focused on residential investment properties, knows that transactions like a short sale can get complicated. Professional representation may help you through the complexity of the process. Certain real estate agencies specialize in short sales, and having one in your court could prove beneficial.
Qualify for a Short Sale
The Federal Reserve Board, under Regulation T, requires short sales accounts to have 150 percent of the value of the sale by the time the transaction starts. That percentage must have the full value of the short sale proceeds (100 percent), with an additional margin requirement of half of the value of the short sale.
The board implemented short sale maintenance margin requirement rules as a protective measure. This will enhance the likelihood that the borrowed shares will come back.
An ideal candidate for a short sale is one who makes loan payments. Also, account someone with a credit rating worth saving.
The Short Sale Process
Two reasons follow why banks grant short sales. Those include a hardship and lack of enough equity in the property to pay off the mortgage after paying the costs of sale.
A financial package needs to be prepared for submission to the short sale bank. Prepare the package with care and keen observation. A big gap presents a red flag. It may indicate mortgage fraud.
As soon as the bank’s approval arrives, a negotiator comes up, followed by a broker’s price opinion. The buyer, the negotiator, and the bank review the file sent, based on the Pooling and Service Agreement (PSA).
The process can take only two to three weeks for a buyer to stick to the transaction. Although in some cases, it takes nearly two months.
Short sales remain a growing area, and it could expand further. Before you consider this, or any other option to sell your home, seek professional guidance, so you’re well-informed.