Over the past 10 years, we have seen a rise and fall of short sales. When they were more prevalent, I took classes for the Certified Distressed Property Expert (CDPE) designation to learn how to work with short sales in the Athens area.
We had lots of calls but not everyone could qualify. In order to sell a home for less than is owed, the owner has to prove that they can’t afford to pay the mortgage and have no hopes of paying in the future.
Short Sale Qualifications
Reasons for a short sale can be a job loss, unexpected expenses from an illness, or death of a spouse. I worked with a family who had spent their money fighting to keep a baby they thought they had legally adopted.
The most common hardship I encountered is sellers who moved from the area to take jobs. Most had lost their jobs and couldn’t find another one in the area. Some of the homeowners had rented out their homes, trying to continue paying the mortgage. That can be more difficult when trying to manage the rental property from a distance, especially as a homeowner with no landlord experience.
Short Sale Approval
Getting a short sale approval is not easy. The homeowner must complete an extensive application and submit financial documents. These include bank statements, a monthly budget for expenses, a hardship letter explaining why they request a short sale, and two years tax returns. Along with that, I submitted photos of the home to show the condition, a home valuation report and a current market report. These documents help to establish the list price.
Sometimes the lender would tell us how much to list the home for. Others would just say to “list at market value”. We couldn’t know if they would accept the offer. The lender ordered a home valuation to decide if the offer was adequate to submit to the investor.
Termination of Offer
As a seller, short sales can be frustrating but as a buyer, it’s even worse! Buyers are typically ready to buy when they find a home, but a short sale can take from 4 months to over a year. It is distressing when the short sales price is approved then the buyer terminates because they’ve found another home. Or, the lender determined the value was higher and makes a counteroffer.
Handling short sales is definitely not the easiest way for real estate agents to make money. In my experience, it is one of the most rewarding -helping a family who wants to do the right thing to eliminate a debt that they can’t repay.
Impact on Credit Score
A short sale will damage a homeowner’s credit score but not as severely as a foreclosure. In order to qualify for a short sale, there are several steps to take. The best way to get the correct information for proceeding is to contact the lender. Most lenders have their own forms and requirements for starting the process.