How to Get a Lender to Say "Yes" to a Real Estate Short Sale in Foreclosure
If you are already facing foreclosure, you may find a solution in a short sale. You would still lose your home, but depending on your state laws and your lender's decision, you may not have to bear responsibility for any amount you still owe after deducting the property sale price. For your lender to consider allowing you to short-sell your house, you would have to already be at least 60 to 90 days behind on your loan, according to Bankrate.com.
Other People Are Reading
Instructions
-
-
1
Gather all the financial documents proving that you're facing serious financial problems. You will have to convince the mortgage lender that you can't financially recover in the foreseeable future. Possible supporting documents include an employment termination letter, divorce papers, utility shut-off notices, medical bills, bank statements and tax papers.
-
2
Hire an appraiser or get a real estate broker to estimate the current market price of your house to show that you can't sell the property and get enough money to pay off your mortgage. A low valuation figure heightens your chances of getting permission for a short sale. You may supply supporting information, such as crime rates, number of abandoned properties in the area and high tax rates.
-
-
3
Advertise your property on the local newspaper and websites. Show the house to prospective buyers and solicit their offers. Get a buyer to sign a contract promising to pay a certain price with a certain amount of down payment. Knowing that a buyer is willing to quickly buy the property provides an incentive for the mortgage lender because a foreclosure can be expensive and long drawn-out.
-
4
Write a letter allowing your lender to discuss your mortgage with potential buyers. Sign the letter and get it notarized.
-
5
Hire a closing agent or real estate lawyer and have him go over your prospective buyer's offer. Have him prepare a settlement statement or net sheet to state the details of the proposed short sale, including the purchase price, the expenses of the transaction and the amount your mortgage lender can expect to get from the short sale.
-
6
Contact the mortgage lender and ask to speak to someone with the authority to negotiate foreclosure alternatives. Present your case to the mortgage lender, stating the reason why you can't afford to continue paying your mortgage. Explain to your lender that your property value has dropped below your outstanding loan amount. Arrange a meeting in person so you can show your supporting documents and state your case in more detail.
-
1
Tips & Warnings
Hire a real estate agent to help you find a buyer because he may know buyers who may be interested in a short sale.
During your negotiations, persuade the lender to not pursue any deficiency, which is the difference between the property sale price and your outstanding loan amount.
The mortgage lender usually does not allow a short sale if you have already filed for bankruptcy.
A short sale will still damage your credit.
A short sale takes less time than a foreclosure, which may take longer than one year to complete. As such, it gives you less time to improve your finances before moving on.
References
- Photo Credit George Doyle/Stockbyte/Getty Images
