Mortgage Short Sale
A mortgage short sale is an agreement between a bank and a borrower to sell the home for less than the amount owed and consider the proceeds as payment for the loan. Although technically an option for any homeowner, a mortgage short sale usually works best for people who owe more than their home is worth, known in the industry as upside-down or underwater mortgages. If you're considering a mortgage short sale, this guide can help you ensure positive results.
HAFA Qualifications
To qualify for the government's short sale program, Home Affordable Foreclosure Alternative (HAFA), one must first be considered for loan modification under the sister program, Home Affordable Modification Plan (HAMP). You must also be at least 60 days behind and prove that you have no other means of paying off your mortgage. If your bank finds you ineligible for HAMP and you meet all the other guidelines, they will send you a mortgage short sale offer from HAFA not long afterwards.
Short Sale Requirements
Your bank will also want some financial documents to back up your claims and see if a mortgage short sale will help you. Some of the most commonly requested papers are bank statements, pay stubs or other proof of income, tax forms, and a hardship letter where you explain why you need a mortgage short sale. You may also have to fill out financial worksheet from the bank, where you detail your monthly income and expenses.
Listing the Short Sale
You can list your home as soon as your bank agrees to a mortgage short sale. There is usually a deadline for closing, so it's best to work with a mortgage short sale agent who can help you market your home more efficiently. Short sales work much the same way as conventional sales, except that it's the bank who approves mortgage short sale offers. You can use the MLS, local papers, and online listings to maximize exposure for your home.
Closing the Deal
Once you've found a suitable buyer and your bank has approved the offer, you can move on to closing and complete the mortgage short sale. Here, you turn over ownership of your home and sign final documents with your lender. If you agreed to pay deficiencies or any closing fees, you may also have to pay them or sign a note at closing. Once that's done, you're free of mortgage obligations and you can start your financial life anew.