So you’ve decided not to walk away….what is your next step?
Just like medical problems and IRS notices, ignoring a problem with a property and a lender will not make it go away or get any better. In order to address the issues, you should discuss or negotiate with the lender. The negotiation is handled through the short sale process.
The first priority is to hire a licensed Realtor that will list the property for sale and aggressively market the property to identify potential buyers. Rarely will a lender discuss any settlement terms until an offer is received from a buyer. Once an offer is presented by a buyer and fully executed by all parties, the short sale “package” can be assembled and presented to the lender. The package consists of property data and financial information regarding the seller, and generally includes the following: hardship letter, 30 days of paystubs (or income statement if self-employed), 3 months of bank statements, 2 years of tax returns, a personal financial statement, listing agreement with the Realtor and a comparative market analysis prepared by the Realtor.
Once the package is submitted with the contract, the lender uses the information, along with independent data collected, to determine if the buyer’s offer is acceptable and whether the seller will be required to make a financial contribution to participate in the lender’s loss. It is also at this point that the lender will negotiate the terms for waiving the deficiency judgment. Although full waiver of deficiency judgment is the goal of nearly every short sale seller, not everyone will receive it.
This process sounds fairly straightforward, and should be, but much like a wedding, there are many people involved and there are many opportunities for something to go off course. These potential pitfalls are more easily identified, prevented or corrected with the help of an experienced short sale professional.
The process is long and may be frustrating at times, but the ultimate outcome is typically worth the stress and anxiety. If the seller does not work with the lender through this process, the lender typically resorts to pursuing a foreclosure and deficiency judgment for the unpaid balance due. Most sellers are very interested in avoiding the deficiency judgment and the negative credit and financial impacts that result. The goal for most sellers is to have the account settled and deficiency balance waived at the closing of the short sale.
So now you’ve decided to take the next step – are your finances on track too? Read next week’s blog post – Debt Settlement & Collections…Avoiding the “B” word!
