If you have defaulted on your loans and want to avoid the serious consequences of foreclosure, one good option available before you is short sale. In short sale, your lender agrees to accept an offer which is less than the amount that owe on the mortgage. In other words, lender accepts a loss so as to avoid the complicated and lengthy process of foreclosure. On the other side, the negative effects of short sale are also much less than the negative effects of foreclosure. A short sale lowers down your credit score by 75 to 100 points. You won’t be however able to take out a mortgage loan immediately after short sale. The minimum waiting period to get approved for a mortgage loan after short sale is 2-3 years.
Though the process of short sale does not take as much long time as the foreclosure, but it does not happen instantly. The time that this process takes do not do justice to its name. Some are of the opinion that instead of short sale, this process should be named as long sale. Here we discuss about some important things related to this process which explains why this process actually take a very long time.
1. It is often seen that instead of directly talking with the lenders, home owners start talking with a real estate agent. This actually delays the process. The amount that they will be required to pay depends upon various factors such as the current market price of the house, real estate commissions, other liens attached to the property, the amount of outstanding debts etc. For doing this calculations, usually home owners prefer to take the help of an agent. This somewhat delays the process.
2. After thorough consultation with the real estate agent, a short sale package is determined. Then the package is sent to the lender for possible acceptance or rejection. The package should contain accurate and all important financial information of the home owners. It should contain a hardship letter. The reasons for non-payments should be clearly indicated in the hardship letter.
3. Usually lenders don’t even go through the package unless and until a sale offer has been made on the house. For that the house should first be listed for sale. Then only the lender goes through the short sale package offered by the home owner.
4. When the listing agent receives an offer, then that is presented before the lender along with the short sale package. In this phase, the eligibility of the home owner to get approved for the short sale process is determined.
5. A variety of documents and reports are verified related to the assets and income of the home owner. Steps are also taken to determine the current market value of the property. Representative of the lender may ask for documents from the home owners several times in the entire short sale process.
All these take some time. Since its involves sale of a property, it can’t happen outright. Here the sale is short not in the sense of time but it is in the sense of lender’s acceptance to agree to an offer which is less than the mortgage owed by the homeowner.