The economy is changing, and it is changing fast. Because of the coronavirus pandemic, homeowners all across the United States are losing their jobs and/or getting laid off. The bad news is, a large percentage of these homeowners will lose their home to foreclosure as a result. That’s been the case for many years, more specifically during the housing bubble of 2008. Between the years of 2006 and 2014, nearly 10 million Americans lost their homes to foreclosure. Some are still recovering today. Even worse, the apprehension behind COVID-19 has Americans speculating: “Will there be another housing bubble?”
It’s hard to know for sure, but there are signs that point toward the possibility of another housing bubble. Since the unexpected appearance of COVID-19, banks are offering 90-day payment forbearance and deferral plans. But what they’re not saying is, at the end of the 90-day forbearance period, the entire lump sum will be due. You probably didn’t know that did you? Some homeowners will windup opting for loan modifications while others may end up in foreclosure. Which leads us to our topic for today, “what is a short sale?”
What Is a Short Sale?
A short sale is the sale of residential property for less than the amount owed on the mortgage. Many homeowners agree to a short sale because they are upside down on their mortgage or experiencing financial hardship. Short sales are one of the best ways for homeowners that are behind on their mortgage to avoid substantial credit damage.
Foreclosures can drop a homeowner’s credit score as much as 300 points. Not to mention, it will take up to 7 years to recover from a foreclosure, and the borrower may have to wait several years until qualifying for another loan. If you find yourself facing foreclosure in Kansas City, you’ll want to contact your lender immediately and see what options they have available to you. Mortgage companies prefer that you try and resolve the issue rather than let the home go to foreclosure. Those that are upside down and experiencing financial hardship should consider a short sale if there are no other options. Below is an overview of the short sale process from beginning to end.
What Is the Process of a Short Sale?
The process of completing a short sale can take some time, however it doesn’t have to be a stressful, time-consuming process if you have the right person working alongside you. Sometimes it is in the homeowner’s best interest to proceed with a short sale because they’re in such financial distress that there is no other way out. Let’s take a quick look at the short sale process.
Initiate the short sale
In order to begin a short sale, the homeowner (seller) must be experiencing financial hardship and have an upside-down mortgage loan. We usually schedule an appointment with the homeowner(s) to get an idea of their situation to determine if they qualify. If the homeowner has an FHA backed mortgage loan, they must first apply for a loan modification. Thereafter, if the homeowner does not qualify, a short sale can be considered. After qualifying the homeowner, we call the lender to collect information on the short sale process, file documentation with the agent handling the case, put the house up for sale, and sending authorization form to the lender.
Submit documentation
Here is a list of the documents needed to submit to the lender:
- Mortgage assistance application
- Bank statements
- Hardship letter
- Paystubs
- Listing agreement
- Special sale contract
- Short sale rider
- Contractor estimate
- Comparable sales
- Letter of explanation
Once the documentation is ready, submit the short sale package to the lender for review.
Review
The review process is where the lender reviews the documents submitted to determine the sale price and net proceeds. But first, the lender must order a BPO or full appraisal if it’s an FHA backed mortgage. After that, the lender will conclude with a price that can be disputed based on hard evidence. If somehow the price is unreasonable, it’s up to the negotiator’s discretion on whether to submit a counteroffer or not.
Approve
Being that the process of negotiating a short sale takes time, getting the approval letter is a sigh of relief. If you feel the price is right, submit the documentation to the listing agent or short sale processor. Conversely, if you do not agree on the price, submit a counteroffer as previously mentioned.
Close
Lastly, you’ll need to close on the sale. Closing involves a few different things and can take 30 days or more. Make sure to complete financing, order inspections, get HUD-1 approval, and close at a local title company. It’s imperative that all parties involved follow the closing instructions to prevent any issues or delays.
How We Can Help
If you’re facing foreclosure and a short sale is your best option, contact info@ibuyhomesinkc.com or click HERE. At JW Home Buyers, we specialize in short sale processing, which includes but is not limited to negotiating with the lender, handling paperwork, hiring contractors for repair estimates, and closing the sale. Furthermore, we do not charge for our services because our profit will be made from the sale of the property. So if you’re looking for a qualified short sale processor, look no further. Our goal is to help you keep your home or sell it, depending on your unique situation. We look forward to hearing from you.