atlanta short sales: a process of avoiding foreclosure

Quick primer on the short sale process: The bank doesn’t want to get stuck with a foreclosure. It's always a bit annoying when you read these exposés about banks licking their chops to kick grandma out of her house and sell it at the auction block the minute she gets behind on her mortgage payments. In the eyes of a bank a foreclosure is a black eye; banks don’t want to own real estate, especially a house that has negative equity in a declining market.

If you, as a homeowner, are getting foreclosed on a house with zero or negative equity then there is little you can do. Say your house is worth $150 thousand and you owe $160 thousand; trying to sell won’t help.

Enter the Short Sale.In a traditional short sale a Seller (along with a reputable, experienced real estate agent) negotiate a deal with the bank that the Seller will pay less than the amount owed on the home to have them release the lien. Voila, everyone is happy: the buyer gets a home a true market value, the previous owner avoids the indignity of a foreclosure, and the bank avoids the time, cost and expense of trying to unload the property – a process that probably would have cost them more than the $35 thousand it just wrote off. 

 

The Process:

Step One: Compile paperwork to show there is a hardship being endured by the homeowner.

Paperwork includes:

a. copy of last mortgage statement
b. loan account number
c. contact information (phone, fax, email)to payment center/bank
d. sellers full name
e. seller social security number (for identity verification only)
f. Authorization to Release Loan Information
g. Cover letter
h. Hardship letter

Bank May Request From Seller (when reviewing an offer):

a. Listing contract agreement
b. 2 year tax returns
c. W-2
d. 2 Months Bank Statements
e. Personal financial statement

** The seller will complete a "hardship letter," which will detail and explain all financial difficulties. Lenders will usually want to validate the seller's financial situation by looking at bank statements, investment accounts, along with examining paystubs and other financial records.  There is where the hardship letter and true reveal of the long term financial impact of the property must be accurately accounted.

Step 2: Market the property as a short sale and obtain an offer from a buyer at a reduced market price.  The offer will be "subject ot lender approva".

Step 3: The lender is contacted with an offer in hand and additional supporting documentation of the sellers hardship to discuss the possibility of a short sale and to determine the lender's process for completing the sale.

Step 4: The lender will assign a "short sale negotiator" or "loss mitigation specialist" to the case.  That person is responsible for reviewing the offer, the corresponding settlement statement, which will indicate the proposed selling price, remaining loan balances and itemize all expenses, including real estate commissions and other fees and expenses associated with the closing.

Step 5: The lender will hire a 3rd party appraiser and/or broker to provide a price opinion by examining the condition of the house and the market value of comparable properties.

Step 6: The lender will scrutinize the purchase agreement to determine if all amounts are reasonable and the real estate commission is acceptable. 

Step 7:  The lender will release and approved "short sale" price based on their internal process and the market information provided

Because of the documentation required, the short sale process can be lengthy. But if done correctly, it can work well for all parties involved. The lender avoids the uncertainty of the foreclosure process, the seller avoids a foreclosure on his or her credit report (along with potential bankruptcy), and the buyer hopefully got a good deal on a property.