A short sale is the processing of selling a home for less than the current balance(s) owed on the loan(s). It typically takes place when the amount owed on the property is more than its fair market value in the current market. In order to short sell a home, the lien-holder(s) (lenders) on the property must approve the sale and agree to accept less than the full amount owed. This is often referred to as a "short payoff." By accepting the short sale, the lenders avoid the lengthy and costly process of foreclosing on the property. For example, you might owe $300,000 on your house, but it may be worth just $175,000 in the current market. If your lender(s) allows you to sell at $175,000 and satisfy the loan, you've successfully completed a short sale. Am I eligible for a Short Sale? In order to negotiate a short sale the seller must demonstrate one of two things: - The seller is in pre-foreclosure status (at least 90 days behind on the loan payments) either due to financial hardship or as a "strategic default" for those who do not have a financial hardship, but wish to sell the property due to significant negative equity.
OR
- The seller is not behind on payments, but is at risk of "imminent default." This means that the seller has less than two months' worth of payments in savings and is experiencing a financial hardship such as job loss, reduction in income, a job transfer that forces the seller to move out of the area, excessive medical bills or a divorce situation that results in one spouse being unable to afford the loan payments alone.
What do I need to do to complete a Short Sale? In order to short sell your home, the lender(s) will require a "Short Sale Package" that must include the following information and documentation: - Full disclosure of your current financial situation
- A letter explaining the nature of your financial hardship
- Last two paystubs for all working borrowers (including L&I and unemployment benefits)
- Last two years’ tax returns
- Last two bank statements
- Last six months’ profit and loss statement (if self employed)
- Authorization to disclose personal information
In addition, the lender(s) will require a fully executed purchase contract, an updated comparative market analysis and current market statistics demonstrating that the fair market value of the home is less than the balance currently owed. More Questions? Visit our Frequently Asked Questions page or fill out the form below for a FREE, no-obligation consultation with an Arizona Short Sale Specialist:
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