Foreclosure Short Sales

Why Do Banks Accept Short Sales?

Banks accept short sales as a reality of the marketplace. Sometimes, a homeowner may buy a property for a certain amount, but over time, the property actually decreases in value for one reason or another, instead of increasing in value as most people expect. If the homeowner can no longer keep up with their mortgage payments in this situation, it puts them in a bind. They are unable to sell their property for the amount they paid for it, the usual way most people facing foreclosure try to avoid foreclosure. However, through a short sale, a buyer and homeowner may ask the lender to accept a bid on the property for less than the full value of the mortgage. Since banks stand to lose a lot more if the home goes to foreclosure, short sales are a good way for them to cut their losses.

What are the Benefits or Positive Aspects of Agreeing to Sell a Home with a Short Sale?

For those facing foreclosure, a short sale is a great opportunity. It allows them to avoid going through the foreclosure process, which can ruin their credit for many years. It can also be a reason for lenders to deny them mortgage loans in the future. A short sale allows them to walk away from a potential foreclosure without any of that damage, and they can start over fresh. For buyers, a short sale not only allows you to help out a homeowner in need, but it can get you a great discount on a property. Many short sale home sell for 30%, 45% or 60% off their market value, and that's not including what they stand to gain once they start to go back up in value. In most cases, short sales homes aren't sunken in value because they are bad homes, but because the local, regional, or national real estate market has brought down their value. Buying short sale homes for cheap now can be a great investment for the future.

How to Buy a Short Sale Home

Buying a short sale home involves a simple process, but it's important to understand. It can take some time to negotiate the price you want and have the lender process it, but once they do, the deals are well worth the time and effort. Short sale procedures may differ from lender to lender, so it's always best to find out how they prefer the process to work.

Step 1: Contacting a Lender for Information

In many cases, homeowners facing foreclosure will actively seek to market their property as a short sale either themselves or through an agent. The first step for buyers is to find listings for these short sale opportunities. A search at BankForeclosuresSale.com can turn up lots of short sale properties right in your area, and it's the best place to start.

Otherwise, if you find a home facing foreclosure you're interested in buying, approach the lender and inquire about the possibility of buying it through a short sale. Most lenders will be receptive to this possibility, as it helps them out of a jam. Carefully state that you're willing to offer a good price for the home, and be sure to provide proof of financing up front so that they know you're serious.

Step 2: Negotiating an Agreement

Usually, the negotiations for a short sale happen between the potential buyer and the current homeowner, but the current homeowner has to have an idea of what the lender will accept. Negotiating often involves both the lender and homeowner, since the homeowner ultimately must present the short sale offer to the lender, but the lender will already know the home is potentially being sold through a short sale.

Step 3: Presenting a Short Sale Package to the Lender

This is where the homeowner and buyer will have to work together. The short sale package consists of a number of documents put together by the owner and buyer that outline the terms and acceptance of a sale of the property. These will include:

The Purchase and Sale Agreement: This is a document that shows the price offered by the buyer and the acceptance of the price by the property owner. It must be signed by both parties, and have a date for the transfer of ownership of the property.

The Hardship Letter: This is a letter written by the homeowner that explains to the lender their reasons for being unable to continue to afford their property. In many cases, the lender will already be aware of the homeowner's financial hardship or inability to pay, but the Hardship Letter makes it official for records purposes. It must clearly state the problem, and show that the homeowner is taking steps to sell the property and resolve the situation, instead of just sitting back and waiting to be foreclosed on. This is ultimately the pitch to the lender to accept the sale, so make it good.

Homeowner Financial Statement: This document will outline the homeowner's financial situation, including all income and all expenses.

Bank Statements: The lender will require the homeowner's previous two bank statements for all accounts.

Latest Pay Stubs: The lender will require the homeowner's two latest pay stubs as proof of income, if available.

Tax Returns and W2s: The lender will require the homeowner's two latest tax returns and W2 forms.

Other documents may be required, and it's always best to check with the lender before submission to make sure you don't miss anything.

Step 4: Following Up

Both the buyer and homeowner should make sure to keep following up on the short sale. Expressing interest can often help banks to see that this is a deal ready to be made, which can spur them to action. Sometimes, banks have other business to attend to, and short sale approval can take some time. The more committed you are to following up and calling the lender, or even visiting them in person, the better chance you have of having your short sale package accepted sooner rather than later, or not at all.

Is Buying Short Sale Home for Me?

You don't have to be a specialist to buy foreclosure short sales, and the practice is becoming incredibly populate among amateur buyers and investors alike. Foreclosures and short sales offer great deals, but it's all too common that buyers don't have access to information on the short sale process. If you're interested in buying a pre foreclosure short sale, just search the listings at BankForeclosuresSale.com to see what's out there. Our expert team can help you understand short sale rules, learn more about becoming an effective negotiator, and how to use our short sale lists to find the best deals. A home short sale or commercial property short sale can be a great opportunity for anyone, and we've got the tools to help you make a successful purchase that earns you great value and great savings.

Related Articles

• The Fundamentals of Short Sale Foreclosure