What is a Short Sale?
Simply put, a short sale is considered when the prices of the house have reduced and the buyer is unable to pay the home loan back. The lender then settles on an amount less than the amount owned by them. A bank can grant a short sale not just in case the seller owes more, but also if the seller has any kind of hardship and cannot repay the loan. For the short sale to happen, the person selling the house will have to make a financial package for submitting it to the bank. This is a short sale. It basically prevents foreclosure and thus wastage of money and time of the buyer as well as the lender.
Buyer's Short Sale Process
The short sale process for the buyer is not too complicated a process. However, as it is a legal procedure, you have to be very careful. There are lots of things you have to consider and be aware of. All the same here is how the procedure goes for the buyer.
Offer it is
The buyer starts off the process by putting across an offer for the home. It will be put on paper accompanied with several documents. These documents will have the acknowledgment that the house will be sold as it is. The offer will also have the note or otherwise, informing you that the seller is not going to do any repairs on it. In short, take it as it is or leave it.
The Mortgage Company
Once as the buyer after you make an offer, that offer will be faxed to the mortgage company together with the copy of the HUD. It will also have the proof of financing the home. Then you will have to forget the short sale process. There is a pile of offers with the mortgage company so be mentally prepared that the process is going to take time.
The Last Lap
In the final stage the bank ultimately gets in touch with you as the buyer after scrutinizing and accepting your offer. The bank will typically give you a deadline for closing the contract. If you as a buyer do not act on it, by the specified date, the contract will be null and void.
This is the short sale process for a buyer. But we are not done yet. Here are few things you should check out before you buy the house in short -
- Letter of authorization
- HUD-1 or preliminary net sheet
- Completed financial statement
- Seller's hardship letter for short sale
- 2 years of tax returns
- 2 years of W-2s
- Recent payroll stubs
- Last 2 months of bank statements
- Comparative market analysis or list of recent comparable sales
Some tips and one liners I guess will be helpful for those who are pondering over short sale buying are worth a mention, coming up therefore are some relevant tips.
- Always consult an experienced real estate agent before buying a house in a real estate short sale.
- Understand the risks involved thoroughly.
- Keep in mind that a low offer can be rejected by the bank instantly.
- Stock on lots of patience.
- Do check on what the bank wants - strong offers or strong buyers.