The Art of Selling
October 17th, 2008
I think everyone knows what a foreclosure is and by now most people are familiar with the term “short sale” and understand that it is a way to sell a home and avoid foreclosure. Why choose one over the other?
Whether you sell your house via a short sale or lose your home to foreclosure be prepared for a credit score reduction of 200 to 300 points. Either way you are going to have rebuild your credit and that will take time.
The primary advantage of a short sale vs. foreclosure is the amount of time you will need to wait before buying another house. Current Fannie Mae guidelines require only 24 months of seasoning before buying a new home vs. up to 72 months for those who lose their homes through foreclosure. With that in mind many people decide that selling via short sale is their best option.
Keep in mind that with a short sale there is the potential for a deficiency judgement on the difference of the loan amount and the amount paid. In California, purchase money (original) loans are not subject to deficiency judgements but many other forms of financing are. This is something that you should discuss with a real estate attorney or CPA prior to making your decision.
If you decide that a short sale is the right choice for you here are some of the things you will need;
1. Authorization to Release Information to Agent. This will allow your Agent to talk with the lender on your behalf.
2. Handwritten hardship letter showing compelling need to sell.
3. Short Sale Listing Agreement.
4. BPO of comparable sales from Listing Agent.
5. Last 2 years W2 Forms all borrowers.
6. Last two years tax returns all borrowers.
7. Last two months bank statements all borrowers.
8. Last two pay stubs all borrowers.
9. Borrowers financial statement. Be sure to accurately list all expenses, as unaccounted discretionary income can be an issue with lender.
10.Detailed estimate for any repairs needed.
11.Fully ratified Purchase Agreement.
11.HUD 1 statement or NET Sheet showing the lender what their NET figure will be and any other expenses owed on the property.
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