A short sale is when you owe more to the bank than your property is worth.
Once you stop paying your mortgage, the bank clock starts ticking toward the foreclosure process.
Processing a short sale is slightly different than a regular sales process. There are a few steps to follow:
You will need to provide your servicer with a hardship letter. A short sale requires that you to gather supporting documents such as tax returns, pay stubs, and additional financial documents.
If you have more than one loan on the property, the junior lien holder needs to give approval. If you have PMI you will need to get a release of deficiency. If you have an HOA, you will need to know the amount owed.
If you have an IRS tax lien, this process can take extra time. A short sale will not be approved until the tax lien is taken care of.
Once all the documents are together, they will be submitted as a package. Be sure you get a receipt/proof that the documents were submitted. The package has to be perfect, with every single requirement on the list submitted, or it will bounce back and cost considerable time. The lender is required to respond in 30 days.
If the paperwork is approved, the servicer will establish a listing price. The sales process can take up to 30-60 days for the GSE’s and for a non GSE it can take up to 90-120 days. Once the house is listed and is under contract, make sure there is ample time on the contract for the loan commitment letter for the buyer.
Fannie Mae “may” provide the borrower with a deficiency waiver, thus “waiving” the balance of the loan amount that is owed, but there is no promise that this will occur.
Dana O’Hara Smith has closed several short-sale properties and has the experience and communication skills to help you through this process.