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How Short Sales Work

Homeowners speaking to lender about a short saleThe short sale process can vary from lender to lender, but it usually follows several general steps. The following are the steps commonly used in a short sale.

  1. First, homeowners usually consult with their lender to discuss the available options regarding a short sale. At this point, the borrower is provided with the transaction information needed from the lender about the specific process that must be followed by a short sale property.

  2. Next, homeowners must send a letter to the property buyer and the escrow agency that lists the short sale information in detail, also authorizing this information to be released.

  3. The lender will then need to review the short sale information included in the settlement statement. This statement includes shortsale information such as the sale price of the property, any expenses involved in the sale, loan balances and other fees that may be required to close the deal.

  4. A “letter of hardship” must be written to the lender by the homeowner. This letter must include relevant details about the financial or economic hardships being faced by the owner. Lenders also look for information that validates the owners need to go through with a short sale, such as pay stubs, investment account information, savings and checking accounts and other relevant financial records.

  5. The broker supplies the lender with information that includes the property’s overall condition and the real estate prices of comparable homes in the area. This information is used to help determine the fair market value of the home.

  6. The mortgage lender carefully scrutinizes all the information provided in the short sales agreement. Lenders do this to ensure that the conditions and amounts are reasonable and to make sure that the commission charged on the property is acceptable as well. Once this agreement is finally approved by the lender, the sale can be closed.


Next: Two short sale options