How to Short Sale Real Estate

You owe more on your home than it is worth. Perhaps you have lost your job and are behind several payments. Maybe you are dealing with an increasing payment from an adjustable rate mortgage and are now facing foreclosure. A short sale is a way of selling your home for less than what is owed on it. By negotiating with your mortgage company's loss mitigation department to accept a lower payoff, a short sale can be accomplished.

Instructions

Difficulty: Easy

1. You first need to list your home with a Realtor. Give the Realtor authorization to discuss your loan directly with your mortgage company. The Realtor should be a short sale specialist and should have you sign an "authorization to release information" form which will be faxed to the mortgage company's loss mitigation department. Now the Realtor becomes your representative agent discussing the terms with the mortgage company.
2. Provide the mortgage company proof that there is an actual hardship. Fax copies of the following documents before they will consider a short sale:
   a. Signed listing agreement
   b. Sales contract and pre-approval letter or proof of funds to close
   c. Preliminary HUD 1 (net sheet) of proposed sale
   d. Hardship letter from seller explaining why payments have not been made
   e. Proof of income of seller
   f. Three months' bank statements of seller
   g. Two years' tax returns of seller
   h. List of all monthly expenses of seller
   i. Contractor's proposal of needed repairs
   j. Comparable sales prepared by Realtor in the subdivision
   k. Title work on property
   l. Signed short sale request document provided by lender
3. Wait for the decision. After all of this has been provided, the mortgage company will order a BPO (a broker's price opinion) and an appraisal. They will then counter offer the contract, saying what price they would be willing to take. Your agent will then need to negotiate with the buyer to see if they are willing to pay what your mortgage company is requiring. It's possible to counter offer too. Once an acceptable price has been reached, the contract will be amended to reflect the changed price and the closing scheduled with the title company or attorney.

Tips & Warnings

• From the lender's perspective, this is usually more desirable than foreclosure and a lot less expensive. As the seller, you may not make any money from the sale, but it will wipe the debt clean as long as you are working on an owner occupied mortgage.