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Once you have made the decision to sell your home for less than owed on your mortgage the next step you need to take is writing a Short Sale Hardship Letter to your bank. The letter will offer make or break your ability to get your home sold without damaging your credit to the extent that a foreclosure would.
The letter should start out by requesting the banks cooperation in the short sale of your home located at …….. Next truthfully state why you are in eminent failure of continuing to make your mortgage payments and why. Job loss, health issues, divorce and increased loan payments due to interest rate escalations are some factors that come to mind. Let your bank know what your monthly expenses are and that you will soon be or are already are under water in debt and will no longer be able to make your mortgage payments. You should also provide copies of your financial statements (include documents that offer proof of financial hardship: Copies of any unpaid bills and/or late notices you have received in the last six months. Including: credit cards, car payments,…Past two months of Proof of Income. Including: past two months paycheck/paystubs, social security,… Last quarter’s profit and loss statement if self-employed, past two years of federal income tax returns, past two years W-2′s, and last two months of bank account statements.) Do not make the mistake of complaining to the bank about your situation. Only state the facts of how you got here and what are you going to do to get out of this situation. Keep your letter as brief (1 to 2 pages max). A lender does not want to read a book of your financial ruin and will often gloss through it if to lengthy.
Next explain that you have chosen a real estate agent (give his/her name & phone number), and you have authorized your agent to speak with the bank regarding the sale of your home. Tell the bank you truly appreciate their assistance and effort in helping your family through this situation. Sign off by letting the bank know you have provided true and correct information to the best of your knowledge.
Not all home owners qualify for a short sale. Lenders require strict criteria from home owners who are considering selling their homes for less than they owe on their mortgage. Below are some factors that the banks take in account to approve the short sale process.
* The homeowner’s financial situation has changed thus bringing in less money than they were when the initial mortgage was made.
* Mortgage payments are still being made and are current but future payments cannot be met. Ample proof in this situation must be provided.
* Market value on your home has dropped significantly and you are unable to refinance your home to qualify for lower payments.
* Existing obligations cannot be taken care of by debt service.
* The mortgage payment is more than one month late.
* The home owner has no funds in their savings account.
* Divorce or death in the family has greatly affected your finances and you will be unable to make future home loan payments.
In order to get a real estate short sale accepted, you must first list your home for sale with a qualified real estate agent preferably an agent with short sale experience. During the listing period, you will need to provide the following documents so your agent can package an offer and a real estate short sale request to your existing mortgage lenders. You will need to provide the following documents to your lender for bank approval on your short sale.
*Last 2 years tax returns with W-2’s and any tax schedules.
*Most recent 2 months of paystubs.
*Most recent 2 months of bank statements for all your accounts, including retirement and 401K.
*Current mortgage payment coupons for existing mortgages.
*Copy of original mortgage note and deed of trust.
Typically, the mortgage lenders will only accept a real estate short sale if you are at least one month behind on your mortgage payments, have a ready and willing buyer and you are unable to debt service all of your existing liabilities. Also, if you financial situation has changed and you are currently making less money than before and you have no more savings, you most likely qualify for a real estate short sale.
A short sale is usually more acceptable for a homeowner than losing a home through foreclosure. And as long as a homeowner can prove that he’s truly unable to afford the home loan, a short sale by the bank will most likely be granted. Short sales and deeds in lieu of foreclosure are also being pushed by certain mortgage-related government-sponsored entities such as Fannie Mae. Sellers, as well, may be able to qualify for new loans in as little as two years where as foreclosures will affect your credit and purchasing power for up to seven years.
It is believed by most that all homes sold under the short sale umbrella are sold at a below market value. That is not exactly true in most cases. While a home may be listed below market to similar homes in the neighborhood, it may not be the extreme bargain for the buyer. Even if the home owner accepts a low-ball offer, the lenders always have the final say on the sale price. If the offer is to low, the lender might refuse to accept the purchase offer.
Real Estate Advice