A short sale is when a property is sold for less than what is owed on the mortgage principal balance, and is structured as a way for both the homeowner and lender to reduce their respective losses.
More often than not, short sales are reserved for situations of extreme financial hardship; prior to a bank beginning foreclosure proceedings.
Homeowners are usually required to prove the merits a short sale to their lender, which involves documenting that selling the home for less than its worth is the best and most viable option for all parties involved.
The short sale process starts with a letter of hardship. Skilled real estate professionals can assist you in understanding what needs to go in the letter.
To prove o the bank that a short sale is your best option, you’ll be asked to submit a cover letter which explains your hardship and to provide full financial disclosure. You’ll also need your original purchase contract, a balance sheet of your income and expenses, your asset statements and proof of income, and two years of federal tax returns in addition to other documents specifically required by your lender. Each lender has their own set of requirements but there are standard requirements common to all.
Lenders prefer handwritten letters and are more apt to agree to a short sale for homeowners who may have lost jobs or encountered significant medical bills. However, if this doesn’t describe your situation you may still qualify. Our team attorney will consult with you to help you determine if you are a likely candidate and to discuss all your options.
Draft a compelling letter and avoid extraneous details. Be short, be thorough, and be complete.
In addition, note that the following traits can help speed your short sale approval :
- The home is marketable
- A second lien holder, if one exists, is agreeable to a short sale
- A foreclosure is not scheduled within the immediate future
Choosing to short sale your home in Jacksonville or anywhere else, though, is not something a homeowner should pursue alone. Fortunately for Jacksonville homeowners, there are a number of qualified teams such as the Fennell Team who are can provide guidance throughout the process.
Before You Short Sale Your Home
Before you decide to short sale your home, there are a few things that you need to know. If you have previously consulted with a short sale expert, they should have already gone over these things with you. Short sales are a relatively new concept for most homeowners and even for a lot of real estate agents. Some agents simply refuse to deal with them (which is a good thing if they don’t have the time and resources to work them effectively). Other agents shouldn’t be working short sales because they don’t have the knowledge, time and/or resources to do them right.
One of the first things to be aware of before you short sale your home is to know what a deficiency is and how it can affect your short sale. Basically, the deficiency amount is the difference between what you owe and the amount of your sale. For example, if you owe $250,000 on your mortgage and you short sell your home for $175,000, your deficiency amount is $75,000. The deficiency amount is important because if the full amount is forgiven, you could owe taxes on it the following year or, depending on your lender and your settlement, they could try to come after you in the future for the deficiency amount. Our team, which consists of a real estate attorney, has a very good track record at getting a release of deficiency but there is no guaranty. Every short sale situation is unique.
If you are considering a short sale, you should also be aware of the foreclosure timeline. Some short sales take longer than others and you certainly don’t want to run out of time to complete your short sale. Obviously, the sooner you begin the short sale process after realizing you cannot continue making your mortgage payments, the better.
It’s also important to know what type of mortgage you have because there are programs available to help homeowners depending on their investor or mortgage type. Our team will assist you in all these matters.