Preparing a Short Sale Letter Offer
Preparing a Short Sale Letter Offer
A short
sale is when the homeowner does not have any equity. In
other words, they owe more than the home is worth on the open
market. Because of the FHA Loss Mitigation Program lenders have
the authority to aid homeowners in times of distress. Often the
HUD/FHA will sell the home for the appraised value. This can
save the homeowner thousands of dollars and could create
equity.
If you are a homeowner in danger of being foreclosed you do have
a few options. One thing you could do is seek a buyer who is
willing to pay the appraised value of the home. Then you could
have the buyer negotiate a short sale with the lender.
In order to negotiate a short sale buyer need to get in touch
with the lenders loss mitigation department. Some banks claim to
not have a loss mitigation department. In reality their
department may go by another name. Buyers need simply ask if the
bank has a short sales department, a work-out department or a
foreclosure department. If that fails the buyer should explain
the situation in detail to be directed to someone who can help.
Once in contact with the loss mitigation department the lender
will likely seek a broker's price opinion (BPO) from a local
real estate broker. The buyer can offer to purchase the home for
the appraised value rather than the mortgage balance if the
lender is willing to accept a short payoff.
The bank will likely want a letter of financial hardship from
the homeowner. This is basically a document saying the homeowner
is not in a financial position to pay off the mortgage. In
addition to the hardship letter the bank will likely want a
HUD-1 Settlement Statement. This shows how money is dispersed.
The bank will look for red flags like excessive commissions to
the seller. The bank may help out the seller but they are not
about to be easily taken advantage of.
If the bank is willing to accept a loss to get the default loan
off the books and help the homeowner they may accept the short
sale offer. However, this is not always the case. If the bank
thinks they can make more money by repossessing the property and
selling it on the open market they have every right to that
option.
Short Sale Tips:
1. Be honest! If the lender finds out you are trying to take
advantage of them they are not likely to entertain any short
payoff offer.
2. Make sure the short sell offer letter is not seen to be
coming from an investor but rather a buyer.
3. Make sure you have financial statements, pay stubs and bank
statements to back the hardship letter.
4. Understand loss mitigation for foreclosure
prevention and to avoid bankruptcy.