Short Sales – What Mortgage Companies don’t what you to know

by > Wednesday, 06 May 2009 > Published in Buyer tips, Seller Tips

If a home is being sold for below what the current seller owes on the property-and the seller does not have other funds to make up the difference at closing-the sale is considered a short sale.

A short sale is different from a foreclosure, which is when the seller’s lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure.

Short sales are becomming an increasingly common sight in our struggling economy and, if handled correctly, can be a win-win-win situation. 

Short Sale Sellers, what you need to know:

The Mortgage Investor can avoid the costly foreclosure process; the seller’s credit rating takes a much smaller hit, if any, and the patient buyer can come away with a great deal on a home.   

What most people consider thier mortgage company may actually be just the Mortgage Servicer.  Commonly they bundle and sell most of thier loans to mortgage inverstors (i.e. Fannie Mae and Freddie Mac) so they can originate more loans. 

These mortgage servicers may need to be difficult to deal with as they have little no financial incentive route people though their  loss mitigation department to process short sales.  They simply want the loan paid off or off thier books and sent to foreclosure. 

So sellers may need to call their mortgage servicer and before giving thier account number, ask to be transferred to the “loss mitigation dept.”  If this doesnt work, contact the mortgage investor directly.  they will gladly work with you.  Also if you have a mortgage insurance premium on your loan, call this company directly.  They’ll also gladly work with you and can give you some leverage with your mortgage servicer.

Short Sale Buyers, arm yourself with the following:

  • Patience. Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale, and could possibly not close at all.
     
  • Financing. Lenders like cash offers. But even if you can’t pay all cash for a short-sale property, it’s important to show you are well qualified and your financing is set. If you’re preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.
  • “Pounceability”. If you have a home to sell before you can close on the purchase of the short-sale property-or you need to be in your new home by a certain time-a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.
  • A Kick Butt Realtor. Uncle Fred who keeps a real estate license may not be your best choice to handle a short sale. An experienced Realtor, specifically trained in short sales, (*cough* like myself ) can guide you through the short sale jungle, knowing the key people to contact and how to work the mortgage lenders to bring

 

 

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