How Short sales got started

Are you looking to profit from the poor real estate market? If so, you will find a lot of tips and information online. Most “professionals” encourage you to target foreclosures and foreclosures alone. Yes, foreclosures have the potential to bring in significant profits, but so do short sales.

What is a foreclosure short sale? It is when the property in question will soon enter into foreclosure. The borrower fell behind on their home mortgage payment and does not anticipate a solution in the near future. The property is sold for less than the outstanding mortgage. Not all lenders agree to short sales, but it is becoming a common practice. Short sales enable lenders to bypass the cost, time, and hassle of foreclosure proceedings. They lose money, but they do recoup some. Unless a lender knows a foreclosure auction will bring in more cash, they typically opt for a short sale.

As nice as it is know about short sales, you may wonder how the process got started. If you know a home seller is trying to avoid foreclosure, you may wonder if suggesting a short sale is a viable option.
As previously stated, short sales result from a borrower’s inability to pay. This is the first stage. The homeowner loses their job, receives a pay cut, loses money from the stock market, or had and another unforeseen financial complication. First, borrowers will approach their lender for help. This may include refinancing or a reconditioned loan. If denied, a short sale is the next option.

A borrower cannot decide on a short sale themselves. They must receive approval from their financial lender. This is not always easy. The borrower contacts the mortgage lender to see if a short sale is even a possibility. If it is, documentation is required. Mortgage lenders send various forms for borrowers to submit. The most important is an authorization lender for personal information. The price of a short sale property is determined by the outstanding mortgage. All prospective buyers will see your name, your address, the amount due on your loan, and so forth. The bank needs permission before disclosing this information.

A letter of authorization does not mean the short sale was approved. It is just one of the many stages. Next, most lenders require submission of income, assets, and a hardship explanation. Those who fell behind in their mortgage due to unforeseen circumstances, such as layoffs, as opposed to criminal activity, are likely approved. Mortgage lenders only use short sales when necessary. They discourage borrowers from using it simply as a way to avoid paying for their home.

Documentation of assets and proof of income is used to determine a borrower’s financial standing. As previously stated, lenders use short sales as a last resort. If these documents prove a borrower can no
longer pay their bills, a short sale is likely.

The final foreclosure short sale step, which involves listing the property for sale, depends on the lender in question. Some opt for in-house selling and others turn to real estate agents. Regardless, once the lender agrees to a short sale, the property is listed for sale almost immediately.

So, there you have it. That is how a short sale property becomes. Unlike buying foreclosures, there is little to no risk of disgruntled property owners. These individuals agreed to a short sale. As a buyer, this not only means you get a home for a great price, but you should get a well-kept home with occupants who will not put up a fight to leave the property. After all, a short sale was likely their idea.

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