The Short Sell Secret Part 3
March 8th, 2010
The advantages of a short sell are abundantly clear when you study the process and the people in Gilbert, Arizona that have been through it already. The short sell is commonly used by people who have little are no equity in their home. So, without equity, the property holds little value for you other than a roof over your head, and couldn’t you find that for a price that is more affordable?
So, how and why does a short sell work? Let’s look at an example first.
Al Mostbroke in Gilbert, AZ purchased a home four years ago that was valued at $250,000. He took out a $200,000 mortgage to purchase it. Now, because of an economy in the toilet and spiraling home prices, his house only has a value of $170,000, but he is still paying the $200,000 mortgage. So, why would Al want to keep pouring money into the mortgage payments when he will have nothing to show for it in the way of equity for decades to come? Plainly stated, he doesn’t want to do that!
Enter into the picture a fairly unknown process called the short sell. With a short sell of his home, Al can basically get out of his mortgage and his home to find a new home with a new mortgage that he can start gaining equity in almost immediately.
So, Al, realizing this fact, hops on the internet and tracks down a local real estate agent that has an abundance of experience with the short sell process. Together with this agent, Al starts the short sell process of the home. It goes as follows…
Al and his agent start with one of two options. (1) they can find a buyer for the home and then go to the lender announcing that they wish to short sell the home and they have a buyer offer in hand or (2) they can go to the bank and request the approval of the lender to short sell the home. Assuming that the bank gives its approval (and they almost always do…will explain why in part 4) Al and his agent begin to compile the paperwork that the lender requires to start the short sell process. This includes financial data like pay stubs, bank statements, and the all important hardship letter (a letter that explains why or how you came to the financial situation that causes you to require a short sell)
The home is put on the market and offers are received. Your agent, the lender, and the potential buyer negotiate the terms of the sale. You just sit at home, not paying your mortgage, and wait for the process to be completed. When the lender accepts the offer, you walk away from your mortgage and your home to begin anew.
For more videos on short sales check out Kevin and Fred on the Short Sale Power Hour. Video for Short Sale Specialists.
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Fred Weaver is a founding co-owner of Group 46:10. He has been working in the financing/real estate business for over 7 years. Fred began his real estate career by working for a large wholesale bank as a processor and rate/lock specialist for home mortgages. After 2 years in the business, Fred transferred from the banking side of home loans to the mortgage side. While on the mortgage side of financing, Fred gained experience originating mortgages and processing files for Morgan Capital of Arizona, Inc.
Kevin is a founding co-owner of Group 46:10. He began working in the real estate business in 2007 after spending 8 years working in the finance industry for companies such as Bank One, Green Tree Financial, & GE Capital.