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Why Does A Short Sale Take So Long?

Contrary to what the name implies, a short sale is usually a very lengthy process. A short sale is the sale of a home for less than the amount owed on the mortgage, and the lender agrees to give clear title to the new buyer. This means that the lender is forgiving the additional debt owed by the borrower and releasing their lien on the property. A short sale is generally less damaging to the sellerís credit than a foreclosure, but it will still have a negative effect on your credit score.

If you own a home thatís market value is less than your mortgage balance and you are having difficulty making your mortgage payments, a short sale maybe the answer. The first thing you need to do is contact your lender. Since the housing crisis of 2006, most banks now have loss mitigation or short sale departments. You will need to fill out a short sale packet which your lender can send you. As part of that package, you will need to write a ìhardship letterî explaining why you are unable to make your mortgage payments and that the situation is unlikely to improve in the future. This is the most important step in obtaining short sale approval because the lender needs to believe that you are unable to meet your financial obligation to repay the loan. You will also need to provide financial records showing proof of income and assets to demonstrate that you do not have the ability to repay the loan. They will also want a preliminary net sheet that shows the sale price you expect to receive and all the closing costs that need to be paid so they can see what they would be able to ìnetî after the sale. Your attorney or Realtor should be able to obtain this for you. The loan company will also want to verify the market value of your property by getting a comparative market analysis or Brokerís price opinion from several local Realtors. All of this takes time and it is not uncommon for the lender to ask for more paperwork or for you to re-submit documents several times before you get an approval. If you are thinking about trying to do a short sale on your property, you need to be patient and expect the process can take up to a year sometimes.

Because of all the issues involved in doing a short sale on your property you will need to retain a good real estate attorney, a Realtor who is familiar with the short sale process and an accountant. Just because the lender approves you for a short sale, that doesnít always mean they will forgive the balance of the debt. Some lenders may try to obtain a deficiency judgment against you for the balance of the debt or they treat the forgiven debt amount like income you will need to claim on your tax return. There are also different ways a short sale can be reported to the credit bureau and how it is reported may affect your ability to purchase a home in the future. Before agreeing to a short sale, consult your attorney and tax advisor about the ramifications so there are no surprises later on.

If you have more than one mortgage on your home, you will probably not be able to do a short sale. The 2nd mortgage holder would have to agree to take little or nothing towards their debt and they will seldom agree to that. Short sales can be a better alternative than a foreclosure for both you and the lender but make sure you have all the facts before you commit to the sale.

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