A brief sale is a real estate sale where the creditor takes less than what is owed on the mortgage. A homeowner initiates a brief sale when his home is worth less than his mortgage and he can’t continue to create mortgage payments. An uncommon process previously, short sales have become commonplace since the onset of the recession in 2007.
Contact Your Bank
The first thing you should do as soon as you have decided to pursue a brief sale is contact with your creditor. Ask the representative if the company participates in the Home Affordable Foreclosure Alternatives program, or HAFA. The HAFA program streamlines the brief sale process by providing owners with pre-approved short-sale terms, using standard transaction timelines and obligations, releasing borrowers from prospective liability for mortgage debt and providing lenders, investors and borrowers with fiscal incentives. If your creditor doesn’t participate in HAFA, request the representative for information about its short sale process, especially about what paperwork is necessary, what qualifications you need to meet, how you are able to be freed from all mortgage liability through the sale process and how long the process will take.
Does Your Homework
Regardless of whether lenders participate in HAFA, they do not automatically approve brief sales. To prevent encouraging borrowers who no longer have equity in their homes from drifting away from their loans, lenders require borrowers to establish they cannot continue to create mortgage payments. Reasons–known as hardships–can contain job loss, income decrease, health problems, divorce, substantial increase in obligations or any combination of events. Gather together relevant records to help you in documenting your case, including W-2 statements, pay stubs, tax returns and hospital bills. Review your lender’s bundle of necessary information, and supply everything it takes to review your program.
Pick an Experienced Short-Sale Agent
When you have gathered all the documentation, start interviewing real estate brokers. Select an agent who’s experienced in short sales, and, if possible, find a person who has previously worked with your creditor. Before setting a set price, have him run a comparative market analysis, or CMA. The CMA is required by the creditor to demonstrate that the sales price is at or close to the market value of the home. When you record the house, you will disclose it as a brief sale, which allows buyers know they’ll be dealing with a creditor as well as a seller. If your creditor participates in HAFA, have your agent include this at the listing information as well so buyers see that the process will be streamlined.
Follow up about the Contract
After a buyer submits an offer you consent, submit it to the creditor with the CMA and hardship documentation. If the creditor doesn’t participate in HAFA, make certain that there is a clause in the sales contract which needs the creditor to release you from any further duty on the mortgage. If this clause is not contained –except at HAFA earnings because the program requires this particular relief –your creditor may come after you for any difference between the sales price and the mortgage balance. Have your agent follow the creditor occasionally to be sure the contract has been reviewed in as timely a manner as you can, and have her update the purchaser’s agent regularly.