Short Sale Listing

Short Sale Listing

Short Sale Listings

  1. How can I find properties that are being sold on a short sale?

    Buyers can use an online database, such as a Multiple Listing Service, or consult real estate professionals who have experience in short sale transactions. Aside from "short sale," some key phrases to look for are "subject to bank approval," "preforeclosure," "third-party review required," and "pre-approved by bank" which may indicate that the property is being sold on a short sale.

  2. What is the difference between a short sale listing that says "approved for short sale" and "third-party review required"?

    "Approved for short sale" means the bank has already determined that the homeowner qualifies for a short sale and has approved the request to sell the property at a reduced price. It is possible that an earlier buyer made an offer that was approved, but did not close the transaction. Making an appropriate and timely offer on an "approved for short sale" listing may be a quicker process because the seller no longer needs to be qualified.

    "Third-party review required" means the homeowner has not sought approval yet from his/her lender to do a short sale or approval is pending review of the homeowner’s application. This means the process could take longer. Plus there is a risk that the homeowner will not qualify for a short sale in which case the property will need to be sold at a higher price.

Short Sale Approval

  1. What are the reasons the mortgage lender will not approve a short sale?

    • The homeowner still has the money to pay the mortgage and cannot show reasons why he/she should not pay the mortgage.
    • The mortgage lender has determined that the payout from private mortgage insurance could reduce the loss enough and chooses to foreclose the property.
    • A short sale is not likely to close because the property title is not clear, possibly due to subordinate liens, and cannot easily be transferred.
    • The foreclosure process is too far along already to complete a short sale transaction.
    • The homeowner has filed for bankruptcy. Negotiating a short sale is considered a collection activity, which is prohibited in bankruptcies.
    • The mortgage lender initially approved the short sale but the homeowner refused to make a contribution to help reduce the lender's losses.
  2. What is a settlement statement?

    A settlement statement, also known as a "HUD-1," shows how the money from the sale is distributed to all of the participants in a real estate sale. Before the seller's mortgage lender approves a short sale, it will look at the proposed settlement statement to review the following:

    • Real estate professional commissions
    • Buyer’s financing source
    • Payment to cover outstanding liens and taxes
    • Proposed closing date
    • Expenses that raise a red flag

    These items provide the lender an idea of the buyer’s capability to purchase the property and the extent of the lender’s loss if it approves the short sale with the buyer’s price offer.

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