In short sale, lender agrees to discount a loan because of financial hardship of the borrower. The owner sells the house or other property for less than the outstanding balance of the loan. Lender has the power to accept or not to accept such short sale. Details mentioned below will provide you sufficient information as to when and why to go for a short sale.
Borrower normally opts for short sale to stop foreclosure of property. But decision to accept short sale remains in the hands of lender. Lender usually accepts short sale when he feels that financial loss of discounting loan is less than the cost of foreclosure as there is heavy carrying cost associated with foreclosure.
“When and why to go for a short sale” will be the question arising in the mind of every borrower reading this article. A borrower should go for short sale if the worth of the mortgaged property is more than the property that can be sold and borrower feels that he would not be able to stop foreclosure of his property. Foreclosure also affects your credit score so you should do everything to avoid it.
It does not mean that short sale will not affect your credit score. In fact short sale adversely affects your credit report but its impact is less than a foreclosure. Like all entries, short sale also remains in your credit report for more than seven years. However, you can obtain another mortgage loan after one to three years of short sale.
There are many disadvantages of short sale, it destroys credit report, embarrasses the family and loosing dignity are some of them. You will have to provide following documents along with application to short sale;
- A hardship letter to the lender to whom you are applying for short sale. In this hardship letter you will have to describe how you got into the financial crisis.
- Proof of Income and Assets will describe your financial condition to your lender truthfully.
- Copies of Bank Statements will tell your lender about the income and expenditures from your side. If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it’s probably a good idea to persuade your lender to accept the short sale.
- Comparative market analysis will allow you to say to your lender that you cannot sell your home for enough to pay off the loan of the lender. Your real estate agent can prepare a comparative market analysis for you which will show prices of similar homes;
- Active on the market
- Sold from the past six months
Article Source: Stop Foreclosure Desk