How to Short Sale Real Estate

By Ray Cox

You owe more on your Homethan it is worth. Perhaps you have lost your job and are behind severalpayments. Maybe you are dealing with an increasing payment from anadjustable rate mortgage and are now facing foreclosure. A short saleis a way of selling your home for less than what is owed on it. Bynegotiating with your mortgage company's loss mitigation department toaccept a lower payoff, a short sale can be accomplished.

Instructions

Step 1:
You first need to list your home with a Realtor. Give the Realtor authorization to discuss your loan directly with your mortgagecompany. The Realtor should be a short sale specialist and should haveyou sign an "authorization to release information" form which will befaxed to the mortgage company's loss mitigation department. Now theRealtor becomes your representative agent discussing the terms with themortgage company.

Step 2:
Providethe mortgage company proof that there is an actual hardship. Fax copiesof the following documents before they will consider a short sale: a.Signed listing agreement b. Sales contract and pre-approval letter orproof of funds to close c. Preliminary HUD 1 (net sheet) of proposedsale d. Hardship letter from seller explaining why payments have notbeen made e. Proof of income of seller f. Three months' bank statementsof seller g. Two years' taxreturns of seller h. List of all monthly expenses of seller i.Contractor's proposal of needed repairs j. Comparable sales prepared byRealtor in the subdivision k. Title work on property l. Signed shortsale request document provided by lender

Step 3:
Waitfor the decision. After all of this has been provided, the mortgagecompany will order a BPO (a broker's price opinion) and an appraisal.They will then counter offer the contract, saying what price they wouldbe willing to take. Your agent will then need to negotiate with thebuyer to see if they are willing to pay what your mortgage company isrequiring. It's possible to counter offer too. Once an acceptable pricehas been reached, the contract will be amended to reflect the changedprice and the closing scheduled with the title company or attorney.

Tips & Warnings

Fromthe lender's perspective, this is usually more desirable thanforeclosure and a lot less expensive. As the seller, you may not makeany money from the sale, but it will wipe the debt clean as long as youare working on an owner occupied mortgage.