Real Estate Short Sales
Reno Sparks Short Sales
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Real Estate Short Sales
What is a short sale?
By definition, a real estate short sale is a transaction where the mortgage lender securing the real estate property agrees to accept a pay-off that is less than the balance on the loan.
There are requirements for a mortgage lender to consider a short sale.
1. The real estate value must be less than the balance owed on the mortgage. 2. The seller must prove hardship.
In proving hardship in a short sale, a seller needs to convey the circumstances of a financial situation on a cover letter. A seller who is requesting a short sale needs to provide full financial information which includes the original real estate purchase contract, proof of income and expenses, proof of assets, income documentation, tax returns in the most recent two years, and bank statements. A seller who is requesting a real estate short sale needs to contact a real estate agent who knows, understands, and is qualified to handle the process of short sale negotiation.
A qualified and experienced real estate agent can make the difference between achieving success or failure. An experienced short sale Realtor will do the work ahead of time to make the process go smoothly even before marketing the real estate property. When a qualified buyer makes a purchase, the work that has been done ahead of time helps a real estate agent get a more expedient process when submitting a short sale transaction to the mortgage lender. It is important that a buyer is made aware of the time that a real estate transaction may take before a mortgage lender accepts the short sale terms.
Success in asking a lender to accept a short sale is also determined by how many loans encumber the real estate property. If there is a second or PMI (private mortgage insurance), the process may take longer.
Is the real estate property marketable? This is essential in the success of a short sale transaction. Sometimes, the real estate property is in a state of disrepair. Finding a buyer who is willing to see the value of the real estate is key. Some mortgage lenders may question a low purchase contract. If property condition of a subject real estate is the basis of a low purchase contract, more work will be required of the listing agent. A BPO (broker price opinion) that is higher than the purchase contract may challenge a lender's acceptance of a transaction. A seller needs a real estate agent who is willing to go the extra mile to provide a lender with real estate comparables having the same physical conditions best suited for the subject real estate property for short sale consideration. A diligent real estate agent will provide essential documentation to prove the value of the real estate property. This diligence helps a mortgage lender in presenting the short sale package to its investors.
In assisting a buyer in a short sale, a real estate agent needs to do his homework to carefully counsel a buyer. A real estate agent must inform a buyer that a low real estate purchase contract may not succeed in the end. Is a buyer willing to lose an opportunity by wasting a minimum of 2 months for a short sale lender to reject a low purchase contract? Careful evaluation is essential. A serious buyer needs to avoid testing a mortgage lender with a low purchase contract in a short sale transaction. This may lead to a lost buying opportunity not only in a particular real estate transaction but in others as well.
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A seller who is contemplating a real estate short sale should get the counsel of a tax professional regarding any tax consequences related to a short sale transaction.
A short sale is a better option than a foreclosure. A seller who is contemplating a real estate short sale also needs to find out from the mortgage lender how the transaction will be reported to the credit bureaus. An informed seller will be able to compare the pros and cons of a real estate short sale.
If you are contemplating on a real estate short sale, Paul Crooks, a Reno Realtor experienced in short sales, will assist you.