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Lanzamiento Vookly

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Bulat Tretyakov
Bulat Tretyakov

Short Sale Approval Letter Buyer



A short sale approval letter is a letter that a lender issues to the seller if a short sale offer is approved for less than the amount the borrower owes on a mortgage. It's issued by the lender at the end of a short sale to demand the "short" loan payoff in return for releasing the lien on the property.




short sale approval letter buyer



In a short sale, the process is initiated by the homeowner in order to get out of financial trouble. The owner must prove the extent of the financial distress through documents submitted to the lender. If the lender agrees to move forward, the homeowner is responsible for finding a buyer.


In a foreclosure, the lender initiates the process, seizing the home and, if necessary, evicting the owner who has failed to make payments. The foreclosure process is generally faster than a short sale, as the lender seeks to liquidate the asset as quickly as possible.


Buying a short-sale property can be a good deal for a prospective buyer. However, it is important to be aware of some of the drawbacks involved. Short sales can take a long time. Moreover, if the bank believes that a foreclosure proceeding is a more lucrative option, it may reject the short sale and move forward with foreclosure instead.


A home goes into short sale when the homeowner realizes that they can no longer afford to keep up with their mortgage payments. Instead of waiting for the bank to foreclose on the home, the homeowner initiates the short sale process by submitting an application to the lender.


Short sales and foreclosures were much more common during the financial recession of 2008. The buyer is more likely to make a profitable trade during a declining market than an advancing market. This is due to the property's value being less than what is owed.


Although the steps involved in a short sale are very similar to a traditional deal, the process is more complicated because of the lender's involvement. The typical home buying process merely requires the seller to transfer their equity to the buyer in exchange for the agreed-upon purchasing price.


However, in a short sale, the transaction is in the hands of the lender, so the process tends to be more time-consuming and convoluted. The following six steps illustrate the primary differences between a short sale and a traditional sale.


Identifying and navigating a short sale can be tricky, but an experienced real estate agent can help you. They can assist with and explain all aspects of the home buying process, including locating short sales.


Even after the lender has accepted the short sale, you need to ensure that the lender and any other lienholders are willing to release the collateral. The more lienholders there are, the longer this process can take.


Despite the benefits involved, there are still quite a few drawbacks that come with short sales. The process is complex and drawn out, which can increase the riskiness of the transaction and negatively impact buyers, sellers and lenders financially.


Charges and expenses. The closing invoice and/or settlement statement must contain all charges and payments (i) detailed in the estoppel letter (e.g., mortgage and other lien payoffs, broker fees, etc.) and (ii) to be made by and on behalf of the buyer and seller. Both the mortgagee and title insurer must approve the invoice/settlement statement.


Proceeds. Excluding the rare circumstance where the estoppel letter authorizes a seller to receive proceeds of a short sale, the invoice/settlement statement should not reflect that the seller is receiving proceeds. Note that some title companies will require an affidavit from the settlement agent and purchaser stating that the seller has not received any of the proceeds.


Powers of attorney. Title insurers are reluctant to accept powers of attorney because it should be apparent throughout the transaction that the short sale is being made with the full authority, knowledge, understanding and consent of the owner/mortgagor. The logical thought that the granting of a power of attorney specifically for the short sale conveyance is sufficient to express the authority and consent of the owner will not be persuasive and the owner/mortgagor should sign the deed and closing documents instead of granting a power of attorney.


As should be apparent from these requirements, short sales are not only nuanced, but are also quite onerous. Connecting with your title insurance professional early on is always advisable, but that communication is even more imperative when dealing with a short sale.


How long will the short sale process take? While all sales are different, you can expect an average short sale to last 4-5 months from list to close. Now mind you, I have had some approved in as little as 10 days, and others that took over a year to have approved, but most traditional short sales will usually fall into these general time frames:


Before your lender will consider the short sale, the property will need to be marketed and a buyer secured. Pricing and marketing should be aggressive, and I generally recommend price reductions every 2-3 weeks depending on property activity. The timeline to secure a buyer will have the most variation depending on market conditions and price, but currently my average listing goes under contract within the first month.


Once a buyer is secured the approval process will begin. We will provide a list of documentation and forms your lender will require as part of the approval process. It is best to have all this documentation ready up-front to prevent any delays. All the documentation will go to your lender along with the ratified purchase contract, estimated HUD and other Realtor provided documentation (listing agreement, listing history, etc). The documentation will be reviewed by the lender.


Once this value has been received by the lender, the purchase contract will be weighed against it. The lender will accept, reject or counter the contract. Your lender will determine their "acceptable" fees and timelines. These fees will very often need to be negotiated several times in order to get the net proceeds of the sale to an acceptable level. The terms of the approval letter will be dissected and sometimes renegotiated. Once acceptable terms for all parties have been reached, the investor on your loan will also need to sign off on the approval.


Once the approval letter has been issued, your sale will move forward as any other. The buyer will need to wrap up their loan, do any inspections or appraisals (if not already performed) and the lawyers will schedule a closing. There will always be a limited time frame associated with the short sale approval letter so all parties will want to be prepared to move as quickly as possible to close.


Unfortunately buyers do not always perform as expected. If a buyer is lost through the process, a new buyer will have to be found. This will also require additional time, but is not necessarily an entire new approval as seller documentation will have already been processed and the valuation will have been performed.


The key to having a smooth and speedy sale is to take action early, and hire the right help. Reid Real Estate Group has been CT's #1 short sale team since 2010.


And unlike with a foreclosure, a short sale home is likely to be in good condition. Often, the current owner will be still in residence and keeping up basic maintenance. A foreclosure, by contrast, might be in disrepair.


Some home buyers choose to put up with short sale complications because they could buy at a bargain price. But you should be fully aware of the potential issues before considering a short sale purchase.


To avoid losing the home through foreclosure, the owner successfully appealed to the lender for a short sale transaction. But in doing so, he or she lost control of the selling process and any ability to ever reclaim the down payment or any additional equity.


Other times, the lender may pursue a deficiency judgment against the borrower through the courts in an effort to recover the shortfall. A homeowner who asks for a short sale should try to get a waiver to prevent the lender from trying to recover the lost money in the future.


Given the complicated nature of the short sale purchase, prospective buyers should not enter the process lightly. For military families with limited time to engage in the home buying process, it is even more crucial to understand that these transactions are lengthy and complicated. That is not to say, however, that the purchase of a distressed property makes a bad investment; in fact, for those who are frugal or limited in funds, a short sale may just help you achieve your best possible investment. Good things come to those who wait, right?


As the process to purchase an REO or foreclosure have their own sets of rule, for the purpose of this article, we will look specifically at the option of purchasing a short sale in order to help you decide whether the investment would prove a good choice for your family.


A short sale involves the sale of a home for a price that is short of the amount owed to the mortgage lender. The term "short" unfortunately does not mean that the process itself is short. Working in conjunction with the seller, the mortgage lender must also agree to the sale of the property. Given that the lender will assume the loss on the amount owed, the lender has the greatest say in whether the sale can take place.


Though a short sale is classified as the sale of a distressed property, the home typically remains occupied by the primary resident up until closing. This means that the prospective buyer is not investing in an abandoned property, and so the property generally does not have the same negative issues associated with the sales of other distressed properties.


Advantages abound for those who achieve successful closings on short sales. Those fortunate enough to purchase a short sale property reap the benefit of the distressed sale price of a foreclosure without the headache of assuming the responsibility of an abandoned and neglected property. This means that military families can afford to purchase in neighborhoods that would otherwise be out of their price range. They can then happily move into their (relatively) clean and maintained home on the date of closing as if they had paid full price for a conventional sale in that neighborhood. A short sale can definitely help a buyer get more for less! 041b061a72


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