As the mortgage crisis deepened, many properties came onto the real estate market using the "short sale" process. This allowed the homeowners to sell the property at a reduced price and pay off some portion of the remaining amount on the mortgage. However, many people who engaged in purchasing homes via a short sale found that the process took much longer than a conventional purchase would. A look at the details of the process shows why this is the case.
Understanding the Short Sale
A short sale occurs on a property when the owners can no longer pay the mortgage. Instead of foreclosing on the loan, leaving the bank holding both the unpaid amount of the mortgage, and the property itself, an arrangement is made to allow another buyer to have the property at a reduced price. The proceeds of the sale then go to the mortgage-holder toward the unpaid mortgage. The mortgage holder benefits from not having to worry about having a vacant, deteriorating property on its books. The owner benefits by not having a foreclosure on his credit record. The buyer of the property benefits by acquiring the home at a lower price and can begin increasing equity in the home immediately.
Get Experienced Help
A short sale can be a very complicated process with significant amounts of paperwork and verification procedures. This type of sale is definitely one place where an experienced real estate person or REALTOR® can help to explain the various steps and expedite the process to some extent. Attempting to carry out a short sale on your own is rarely a good idea.
Verifying the Need
One of the reasons why short sales take more time than conventional home purchases is the bank’s need to verify whether or not to make it a short sale. The previous owner must be unable to continue making payments on the loan, and this fact must be verified by specific means. The person cannot simply walk away from a property he or she no longer wants.
A Tale of Two Lenders
In some cases, the amount paid for the property must cover more than one loan, such as the original mortgage and a house equity loan or line of credit. These loans may be held by banks other than those with the original mortgage, and a large amount of paperwork must accompany the short sale procedure. In the process, some of this paperwork may be lost, requiring re-submission of the documentation. These problems can extend the preliminary process for a considerable amount of time.
Expediting the Process
Because the short sale process depends on a number of different parties, all required to submit their documentation in a specified form, it can take several months to bring the many facets together for completion. You can expedite this process on your end by doing your research, learning about any loans or liens currently on the property, and inquiring how they will be paid off. You should also be in contact with the lender’s loss mitigation department to ensure your side of the paperwork is managed properly. Determine the correct short sale application process required and fulfill their documentation needs as thoroughly as possible. Your financing should be arranged in advance and ready to go when the short sale reaches final approval.