The housing market is inundated at the moment with homeowners desperately trying to sell their homes very quickly. With the fluctuating foreclosure rates, homeowners are faced with utilizing mortgage short sales. Short sales are one of the ways to avoid foreclosure on your home.
Foreclosure is when a mortgage company or lender decides to terminate the contract with the buyer by foreclosing the right of redemption for the property. This is a result of a breach of contract on the part of the buyer, usually a default in payment.
Home short sale is when homeowners try to sell their houses for less than the money that they actually owe on the property. The mortgage company agrees to discount a certain amount due to financial hardship that the borrower may face. The short sale can work only if the bank or lender is willing to sell at a discounted rate and there is a committed buyer.
The final decision on the short sale is dependent on the decision of the mortgage company. The mortgage company will need to evaluate certain factors before they can approve the sale. So, with a short sale, it is important for both seller and buyer to be cooperative. Additionally, the procedure for a mortgage short sale is normally longer than a standard purchase so both parties will need to be patient.
The factors that will be considered by the mortgage company include an assessment of your financial situation, the reasons behind why the payments cannot be maintained and whether the short sale will be profitable for the company. It may be that the mortgage company will make money if they were to repossess the home and put it on the market themselves. Even though, they can be quite helpful, mortgage companies still maintain their objective to make money so may refuse and proceed with foreclosure.
One of the key pieces of information that will affect the decision of the mortgage company is the price opinion of an established broker. The broker will give the mortgage company the market value of the house. This is when you need the price of the home to come in low. If the broker estimates a high price for the home, it encourages the mortgage company to opt for foreclosure rather than a mortgage short sale. So the lower the price, the more likely that the short sale will be approved by the lender.
The buyer will need to gather documents to show where the financing for the sale will be coming from. The documents also need to be reviewed and approved by the lender before the sale can go ahead.
Even though the whole process can be long, arduous and frustrating, mortgage short sales are usually beneficial for both the seller, the mortgage company and the new short sale buyer. The homeowner will have avoided foreclosure, the new buyer would’ve purchased a home for less than the market value and the mortgage company gets the best deal they can.