For millions of Americans, owning a home ranks amongst the most important goals and achievements by which we measure and evaluate our lives. It occupies a place at the forefront of our conception of the “American Dream”, and is a milestone by which many measure their success. But as the economic hardships of the last decade continue to linger and affect people from all incomes and ages, this dream has for many become a quagmire of difficult and heartbreaking decisions as more and more home owners are forced into foreclosure, bringing even more hardship and enormous disruption to their personal and financial lives. Facing foreclosure can have a paralyzing affect on a homeowner, and often they choose to continue to hold on and hope for the best until it become too late. The reality of foreclosure however can be avoided through the real estate short sale, and although the short sale still entails significant loss for the homeowner, it can be the path to avoiding the devastating repercussions of foreclosure and help preserve a financial foundation on which lives can be rebuilt and the dreams of home ownership rekindled.
The term short sale can at first be misleading, as the process is not by any means short. Rather, an accurate reading of the term is that the property is being sold for less than it’s worth, you are selling but still “coming up short” of what is owed. Simply put, the real estate short sale is an agreement between the mortgagee and the mortgage holder to cut their losses. It’s not a winning situation for either party but it does allow both to avoid some significant losses. Foreclosure is an expensive process for lenders, but that fact certainly should not be considered by the debtor as any type of leverage or advantage and any short sale agreement always depends completely on the willingness of the lender. Neither is undertaking a short sale an easy or simple process; it is complicated, may require the assistance of attorneys or certified accountants as well as real estate agents, has no guarantees and may prove a lengthy process requiring patience and perseverance. A successful short sale, however, can allow the homeowner facing foreclosure to mitigate the severity of the damage to his credit rating and also gives them the opportunity to manage the remaining debt in a way that allows more freedom to maintain their quality of life and control of their remaining financial resources.
In order to pursue a short sale of a property, several factors should already be present. First of all, in order for an offer of short sale to be seriously considered, there must be real, demonstrated financial hardship on the part of the mortgagee. Second, the property in question should be “under water”, a term used to describe the situation where the amount still owned on the mortgage exceeds the actual value of the property. The mortgagee should have also already attempted to sell the property on favorable terms without success. These factors together are often the basic criteria that must be present for most lenders to consider an offer of short sale.
Once these criteria are established, the next step for the homeowner is to seek out a professional real estate agent with demonstrated experience working with real estate short sales. Two certifications are available for realtors in the field of short sales, the SFR (Short Sale and Foreclosure) and HAFA (Home Affordable Foreclosure Alternative) Short Sale certification. In addition to this specialized training, the best choice of agent will be one who is active in the area of the property and possesses firsthand knowledge of the real estate trends and issues specific to the locality. In addition to being able to effectively navigate the complex procedures of the short sale, the realtor will be able to determine if there are yet still other alternatives that could be pursued by the homeowner before beginning the process.
Once the realtor has determined that a short sale is the best course of action, the process of gathering and preparing the necessary documentation begins. The homeowner will need to contact your lender to find out what their exact requirements are, and follow their instructions precisely to provide the best chance of having the short sale accepted without unnecessary delays. This documentation is what will make the case for the short sale to the lender, and should present a clear, compelling case for why the short sale is the best solution.
Guest post from Tracey Louis. Tracey is a licensed real estate agent that has actively invested in real estate investments for a number of years, and enjoys tracking and writing about market conditions.
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