Prerequisites of a Short Sale
Defaulting homeowners generally cannot qualify for a brief sale until they are nicely into the foreclosure procedure. Depending on state law, the brief sale negotiation process can start six months following the notice of default has been issued. Then, the homeowner has to be eligible and the lender has to consent to some offers made prior to the brief sale process can be finished.
Mortgage in Default
The homeowner must be in default prior to the lender will think about a brief sale. To be in default, the homeowner must miss mortgage payments. Then, the homeowner must explore all other options (such as repayment programs and loan-modification applications ) before he can be eligible for a quick sale. The time that it takes to get to the brief sale stage is dependent upon state law but generally happens at least six months following the notice of default has been issued. Even then, the time frame could be extended based on negotiation and management aspects, such as lender backlog during economic downturns.
Under Water
To be eligible for a quick sale, the property’s value must fall below the outstanding mortgage balance (including all fees and penalties). The homeowner may commission a formal appraisal to ascertain the property’s market value. Thus, in the event the homeowner took a $200,000 mortgage and the appraised price of the house is $150,000, then the home is considered”under water” and the bank will likely agree to a brief sale.
Prove Financial Hardship
The homeowner must establish financial hardship and demonstrate it by composing a hardship letter to the lender. The homeowner must also submit documentation detailing her present financial standing (in the kind of recent pay stubs, income tax returns, W-2 types and expenditure sheet) and any extenuating circumstances, such as job loss, death, health conditions or other factors that result in the reduction of income. What’s more, the homeowner must have no assets which the lender may use to recover its own losses. Financial hardship must also be long-term, meaning that the homeowner won’t likely recover soon after the sale has been completed.