Short Sales 101

Shortening the Short Sale  In today’s market, bank owned and short sale properties are the norm rather than an exception.  Understanding them can do more than just make them more tolerable.  It can actually lead to a faster and more rewarding transaction.

The Short Sale is when a property is sold for less than what is owed against it.  A second part, called a short payoff is when the lenders involved agree to accept that sale and give clear title to the buyer.  Although these two are slightly different, in today’s market they are both generally referred to as a short sale.

Many recent mortgages were written with a second lender subsidising the down payment.  These seconds, as they are called, may also come into play for a refinance, an equity loan, or other reasons.  This second is often a different lender than the “first”.  This lender must also agree to the financial agreements in the short sale, often meaning they will get next to (or actually) nothing.

MI (Mortgage Insurance) in the Short Sale  can cause more delays.  MI is generally required when the down payment is less than 20% of the purchase price.  Sound familiar?  Since they are not required to pay any claims until clear title is demonstrated, every short sale must have an exclusion in order to complete.

These three things (and more) are IN ADDITION to the normal parties and conditions involved in the sale of property.  THEY WILL TAKE LONGER!  If you accept that things get better.  Does that mean there’s nothing you can do to speed things up?  NO!

As the Seller have you documents ready.  Answer the calls from your lender, and anyone you might have helping you with the process.  Be honest about why you are unable to afford the payments (ie. what has changed since you agreed to the mortgage terms).  Make sure you have an agent that knows what is required and does it.

As the Buyer accept the fact that multiple entities are involved and that it will take longer than an equity (normal) sale.  Make sure you are pre-qualified for the amount needed.  Keep your proof of income and bank statements ready and updated.  As with the seller, make sure you are working with an agent that understands the process, and acts when needed.

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