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Short Sale Process for Sellers and Buyers

Great tips on the short sale process for buyers as well as sellers. This is a must read before you jump into buying or selling a short sale.

The short sale process is a confusing one, even for licensed real estate agents. The most frustrating piece is that no two short sales are the same.  It does
not matter whether you're a buyer or seller, every single one is different.  There are certain things  you need to know depending on which side of the fence you're on so we will give you some generalizations to help you understand the process from both sides.

I want to start by explaining a short sale is when a seller can no longer afford to make payments on their home and they owe more than the home is worth. They go to their banks and say will you allow us to sell the home for less than what we owe? This is what creates the short in short sale. The banks will compile all of the market data from the listing agent along with all of the other information from the seller to determine whether they will allow the short sale to happen or not.

If you're a seller the most important thing for your bank to know is that you have a hardship. Some examples of a hardship would be job loss, job transfer, medical illness, divorce or a myriad of other things. You have to be able to demonstrate to the bank that there is legitimate reason why you can no longer afford the home you're in. What the banks are going to ask of you will be what is called “the package.” Included in this is  hardship letter, the last two years tax returns, your last two bank statements, a budget of your monthly expenses and your last two pay checks. Starting this process sooner rather than later is always advantageous to you as a seller because the more information that a listing agent can supply to the banks ahead of time the smoother the process can be. Remember not only are you trying to get out from under your debt you're also trying to make it attractive for a buyer to want to stay with you throughout this whole process.

If you're a buyer the most important thing to know is you must have patience. Yes it's true there are all types of nightmare stories that I could tell you about short sales that we have all heard about many are true. But I believe you can really minimize your risk by following some simple rules before you write an offer on a house. As a buyer some of the things you're going to want to know are the following. Has there been a Sheriff sale on the property? How many banks are involved in the short sale? Is the seller willing to work with the banks if they are required to bring some money to closing? Are they behind in their payments? These are among some of the most important questions that need to be asked by your realtor. The more information you can get on a property before you make a decision to write an offer the better chance you have of entering into a contract with a successful short sale. Were buyers get hung up is when they are not doing their due diligence ahead of time in finding out all the specifics.

Some short sales can get done in 90 days or less. The average short sale takes 4 to 6 months. There's nothing you can do to speed this up as a buyer but there are things you can do as a seller to speed the process up. The most important thing is having all of your documentation organized and submitted in a timely fashion. As a seller you want to do everything you can to help make this process happen because it's your one chance to be able to negotiate globally with all parties involved in your home. For a buyer you want to look for a seller who is willing to do what it takes to help get this short sale done. If you're looking at a house where the sellers have moved out and have already distance themselves from the situation you may want to ask more questions before you move forward.

These are just a few of the basic things that you need to know as a buyer and a seller when you're considering getting involved in a short sale. As always if you have any questions please feel free to contact us and will be happy to answer any questions that you have.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

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