Understanding Short Sales: What is a Short Sale and How Do I Qualify?
As many of you already know, short sales have become quite common in recent times. There are many emotions involved with being a part of the short sale process – especially if you are the one in the “hot” seat.
Having represented several sellers in the process of short sales, I’ve noticed the same questions and concerns brought up by nearly every one of them. This situation can be stressful and confusing, which is why it’s best to have a seasoned real estate professional to guide you through this to make things as calm and easy as possible.
I’m going to go through each of the top questions that I’ve encountered and help shed some light on the seemingly mysterious-yet-not-very-complicated process.
“What exactly is a short sale and do I qualify?”
A short sale is when you sell your house for less than what you owe on it. There is no guarantee that you will qualify for a short sale; so, what you need to do first is hire an agent — preferably one well-versed in selling homes through short sales — to put your house on the market and try to get a fair market offer for the sale of your home.
While your agent is trying to get an offer, you need to generate a hardship letter of why you need to sell your home. For this you will need:
1) Six-months of bank statements
2) The last two years of tax returns or extensions and
3) Either three-four months worth of pay stubs or a six-month profit and loss, if you are self-employed.
Once the offer is made, the agent will submit it to the bank – along with the documents listed above – to start the short sale approval process. In this time – if all is in order – the bank will then order their own appraisal. If the appraisal comes in close to the offer, the chances of you getting approved are very good. If the bank’s appraisal is more than the offer, than this is where the negotiation takes place.
When an agreement is made between the bank, buyer, and seller, the bank will draft an approval letter and the escrow will begin. This process pretty much goes juts like a standard sale at this point. Short sales usually take anywhere between 60- 90 days, so patience is absolutely key during this stage of the process.
Check back soon for my installment of Short Sales Questions and Answers. Have you been involved in the short sale process? I’d love to hear about your experience in the comments below.
Darlene Hutton is a Realtor and community expert in the Venice neighborhood of Los Angeles. Originally from Michigan, she loves the Southern California lifestyle. You can reach her at darlene.hutton@thepartnerstrust.com Never miss important Los Angeles real estate news or changing market conditions! Subscribe via RSS or email delivery!
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Great post! This is a hot topic in Arizona too!
Darlene
This is EXCELLENT!!!!! What great detailed information.
short sales do not have to be that difficult if you know what you are doing!