Many homeowners are looking for information on how to short sale their property. This option is usually the last resort to avoid foreclosure and prevent bankruptcy. Short selling real estate involves convincing mortgage lenders to accept less than the outstanding balance of the home loan. Obtaining proper short sale information is crucial for success.

Covering every detail of how to short sale real estate requires a book. Let’s focus on the basics of how short sales work and what is involved. Each lender handles short sale transactions differently, so there is no one-size-fits-all strategy for negotiation. The only way to know the exact process is through direct contact with your lender.

Realize short sales are a complex process and require a lot of paperwork, patience and persistence. Some banks respond to short sale requests within a few weeks, while others take a few months.

When borrowers become 15 days delinquent on their mortgage note, lenders can commence with preforeclosure action. Few banks initiate foreclosure this quickly, but as credit becomes tighter, banks are becoming less tolerant.

Delinquent accounts are turned over to the lender’s loss mitigation department. A loss mitigator is assigned to work with the borrower and help devise a repayment plan to cure mortgage arrearages. This might be obtained through a mortgage forbearance, loan modification, or mortgage refinance.

Loan modifications are a good choice for homeowners who are capable of making future mortgage payments. Each lender handles modifications according to their established protocol. Some require borrowers to become current on their loan, while others accept partial payments. Other lenders will roll the delinquent amount to the end of the loan and extend repayment terms. A few will temporarily reduce or suspend payments.

When borrowers do not qualify for loan modifications and unable to refinance, the next option is to short sell the property. The majority of mortgage lenders require borrowers to have a buyer in place before granting short sale approval. Others will grant the borrower time to list the real estate through an agent. The sale must occur within a set timeframe for a predetermined price.

One highly regarded secret for locating buyers is to sell short sale real estate to private investors. Many real estate investors seek out short sale homes because they are sold below market value. With a little work, most bank short sale properties make smart investments.

Today, a large number of investors purchase distressed properties with cash. Buying houses for cash opens up room for negotiation and expedites the sale. Lenders do not have to wait for the buyer to obtain financing and the seller doesn’t have to worry about the deal falling through.

Before entering into a short sale arrangement, it is imperative to determine what type of transaction is instituted by the lender. Two types of short sales exist – Payment in Full without Pursuit of Deficiency and Deficiency Judgment. The latter should always be avoided.

When lenders issue deficiency judgments, the borrower is responsible for paying the difference between the loan balance and actual purchase price. If the borrower cannot pay the full amount, a deficiency judgment is issued and remains on their credit report until fully repaid.

Payment in full means the bank accepts the purchase price to satisfy the loan and the borrower is able to walk away without owing additional funds.

Take time to become educated about how to short sale, as well as the pros and cons. Short sales can be a lifesaver or drive you deeper into debt. It’s imperative to understand all aspects of the transaction before signing on the dotted line.

Author Bio: California real estate investor, Simon Volkov specializes in teaching borrowers how to short sale real estate. His book, “Short Sale Hardship eBook Course” details the process and offers practical negotiation techniques. Purchase your copy today at www.ShortSaleHardshipLetter.com.

Category: Real Estate
Keywords: how to short sale, short sales, loss mitigator, short sale approval, bank short sale