If you find yourself facing the fact that you are no longer able to make your mortgage payments, there is a much better alternative available to you. You might want to consider pursuing a short sale instead of foreclosure.
Just What Is A Short Sale, Anyway?
A real estate short sale occurs when you and your lender mutually agree that the selling of your property and absorbing a moderate loss is preferable to having you default on the loan.
Both parties can benefit from this type of transaction. You can avoid having a foreclosure on your credit report haunt you for several years, and the lender can avoid the costly fees associated with foreclosure.
How To Get The Short Sale Process Started
HUD (The U.S. Department of Housing and Urban Development) will require that you be reviewed for all alternative options before they will determine that a short sale can be pursued. The review process can take as little as 30 days, or can take as long as 90 days, as they look at your situation and make a determination that you have a legitimate hardship that would warrant a shorts sale to be a viable option. You will have to certify that your home has not been rented for more than 18 months, that you are maintaining your property, that there is a marketable title, and that the property has only one FHA insured loan. Remember too, that you must get this process started, not your Realtor. You are also required to return all the documents within the required time frames and maintain contact with your mortgage servicer.
Once you are approved to short sell your home, you will receive an Approval to Participate (ATP) letter, and the foreclosure is put on hold. Many lenders will cancel this agreement if you do not return the ATP within seven days of the date of issuance, so it is very important to sign it and get it back promptly.
Although you do not have to have a listing agreement in place or an offer on your home, you will want a Realtor experienced in the short sale process to help you see this through.
Your Realtor’s Involvement
You will want to choose a Listing Specialist who has the experience you can count on to make sure the process moves forward and smoothly and hassle-free as possible. Make sure you choose someone who knows how to work you through the maze of paperwork, ensuring it all gets completed and back to the lender.
You and your Realtor should sit down and review the “Welcome Package” you will receive. Then, start gathering the documents you will need to complete the process, making sure everything is signed and dated where indicated. These will include:
- Hardship letter
- Pay stubs (dates, amounts, names, institutions)
- Marketable title
- Bank statements (make sure all pages (front and back)
- Certificate of Occupancy
The next step is to order an appraisal. It is your Realtor’s responsibility to schedule this and make sure the appraiser can gain to your home.
The appraisal will determine the listing price and will allow you to go forward with a listing agreement. Your agent will provide the short sale specialist a copy of the listing agreement and proof that the utilities are on. He/she will provide the short sale specialist with a copy of the listing agreement every 30 days until the property is sold.
If you have any questions about the FHA pre-foreclosure or “short sale” process, you can visit the FAQ page at the U.S. Department of Housing and Urban Development.