The Short Sale Process
First of all, what is a short sale? A short sale occurs when
a home is sold and there is not enough proceeds left from
the sale to pay the lender back all that is owed on the
While some short sales occur because the owner is behind on
the mortgage payments, most occur because
The owner must sell
Market values have decreased since they
bought their property.
The property value no
longer exceeds the amount of debt on the property.
In negotiating short sale issues, you should understand that
the mortgage servicer who collects your mortgage payment may
not be the party to who you need to the talking with. The
parties with a vested interest in your home are the note
holder and the mortgage insurer, if their is one. It will be
one of them that will have the final say as to what they
will accept for payment if it is less than what is owed on the
property. Your mortgage servicer, the person you make your
payments to, can tell you who you need to contact to discuss
the possibility of a short sale.
Before a lender or loan insurer will
decide whether they will consider a short sale, loan
modification or repayment plan is
the best recourse, the following factors are often
taken into consideration.
Status : Usually a loan must be in default
or default must be imminent to induce a lender to accept
less than the amounts due under the note. However, in
some situations, such as a declining market with a 100%
loan, or if the property is not worth what is owed may
be sufficient to induce a lender to a short sale.
Hardship : The property owner will be required to
demonstrate that there are circumstances beyond their
control which impacted their ability to make the
scheduled payments. The circumstances may be involuntary
loss of employment, extended illness, divorce, or
escalating loan costs due to an adjustable rate
Financial Status : The lender may, in addition to
verifying the owners income, require documentation of
the owners assets and liabilities to determine whether
the owner has other resources from which to pay the loan
before allowing a short sale. If you have enough assets to satisify the loan the lender may want you to use them before considering a short sale.
Fraud : If the loan goes into default within the
first 2 years the lender may audit the documents and
make a determination if any fraud was involved by the
owner in obtaining the loan.
Property Value : The lender will require a
current property appraisal in order to determine the
fair market value of the home.
How does a second mortgage affect a
potential Short Sale?
If you have a second mortgage on your home
it may not be possible to arrange a Short Sale. The seller
will not be able to convey clear title to the property until
the first and second lien holder has been paid in full or an acceptable agreement has been made. If
you cannot work with both lien holders the short sale will
We hope that this web page will give you some insight
about the short sale process. If you have any additional
questions about this
process please feel free to
call me at 252 514 9157. We have helped many clients determine if this may be an option for our clients.