Q&A: How does short sale work?

Question by Femenino: How does short sale work?
Due to a divorce, my coworker moved out of her house she brought 3 years ago. As of March, 2014, her payments are current. But starting from April, she will no longer make payments. She originally paid 19,000 ( due to refinancing and home improvement loans, the balance on her mortgage is $ 80,000). However, houses in her neighborhood cost less.

I am interest in purchasing her home, but not for $ 80,000. Could she do a short sale? What advice would you give to both of us?

Thanks

Best answer:

Answer by A Hunch
Short sales have to be at an arms distance. This means it has to be sold to a random person not someone that already has a relationship with the owner, unless you are purchasing it for the full home value.

Additionally, if your friend only owes $ 80,000 and has an income of about $ 27,000 per year, she will have trouble getting out of the loan since she earns enough to pay the mortgage.

Your friend might need more information on the foreclosure and short sale process before she decides to stop paying the mortgage.

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4 Comments → “Q&A: How does short sale work?”


  1. realtor.sailor

    Mar 31, 2014

    First most banks require that foreclosure be filed before they will consider a short sale. She needs to talk to the lender’s loss mitigation department. Once the bank agrees to a short sale the home must be listed with a Realtor. The lender will have the property appraised and that will establish a bank approved price and that’s the price you would pay for the home.


  2. loanmasterone

    Mar 31, 2014

    Friends, family finance should never be in the same arena. This would cause more friction. In later years your friend might still be under the idea that you purchased her house when she was down. She might still hold this against you for years to come, even though she might not say it out loud.

    A short sale will be approved when the property has been listed by a real estate agent and has been on the market for a certain time frame.

    Once it has been on the market for a certain time frame, the homeowner is able to, with the help of the listing real estate agent request a short sale package from the homeowners mortgage lender.

    Once the short sale package is complete and signed it it returned to the mortgage lender for approval. Once the mortgage lender approves the short sale all offers would have to be sent to the mortgage lender for approval.

    This is not an automatic approval process. If the current homeowner is financially able to pay the monthly mortgage payment the mortgage lender might not approve the request for a short sale.

    I hope this has been of some benefit to you, good luck.

    “FIGHT ON”


  3. Carol

    Mar 31, 2014

    First she must ask her mortgage holder to approve the short sale and they will either say no not until you are late or never – or they will say “yes for X amount.
    The sale moneys that you would pay would all go on her balance, she would still owe the remaining balance after that sum is deducted.
    Often however the sell short sale must be open to general public(I’m not sure if this IS a law or if that’s just a requirement) so you will not be the only on bidding on it and might not get the home


  4. Kathleen

    Mar 31, 2014

    Short sales do not require the current owner to behind on their payments. The purpose of a short sale is because the home is worth less than what is owed on the home. The current owner would have to submit a sales contract, and a written request for a short sale along with a letter of explanation why they want / need to short sale the home. The current lender would then send out a real estate agent to obtain a value of the home to see if the home is truely worth less then what is owed on the home. Then the current lender may or may not want information on you. It’s a very lengthly process.

    The only time banks don’t want parties related is in bail out situation. Plus FHA would allow your friend to purchase another home if they sold their home in a short sale situation as long they stayed current on their loan at time the closing took place – and the only reason for the short sale was because of the drop in value.

    Have your friend contact their lender to see what is needed – and go from there
    Good luck – hope this helps


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