Within the first six months of 2018, over 300,000 United States properties either faced default notices, bank repossessions, or the Auction Block. If you’re facing financial troubles and selling your home at a loss may be your only option, it’s important to know how to go about a bank short sale and what it will involve.
If it’s time to move on from your home, read on for more information on approaching the bank with a short sale and how to get the most out of it.
What is a Bank Short Sale?
Whether you are looking to get out of financial trouble, or simply need to move on from your home when the market is less than ideal, you may be looking at a potential short sale.
At it’s most basic definition a short sale is when a homeowner sells their home for less than they originally paid. Meaning your home is now at a loss, or that you’re falling “short” on your investment.
While short sales are becoming less common due to a gradually improving economy, many individuals still face the prospect of having to sell their home for less than desired.
How Does a Short Sale Work
Your typical short sale situation will look something like this: Initially, a home seller will put their property on the real estate market, offering a short sale or subject lender deal to those that may be interested in buying.
Since short sale deals dramatically benefit the buyer, it won’t be long before the first offer will come in.
From there, the homeowner is responsible for contacting their bank to submit a formal application requesting the authorization of the short sale.
It’s important to note that there’s no direct guarantee that the bank will, in fact, approve the short sale. Once the bank has reviewed the pending application, there’s a good chance they will send out an appraiser to review the full value of the house and to be sure that it’s aligned with the current sales offer.
How a Short Sale can Benefit You
While a short sale may sound less than ideal, there are still a number of benefits that come with the solution.
For example, a short sale is a better alternative than a foreclosure when it comes to your credit score. It’s also emotionally easier to face the problem head-on than to stand under the pending doom of a potential foreclosure.
Finally, with a short sale, you won’t have to pay additional home sale fees. Typically real estate agent will take home 3% to 6% commissions on a home sale. The short sales are handled by the bank, so any additional fees and commissions are then covered by the bank.
How to Present a Short Sale Offer to Your Bank
As mentioned, there’s no guarantee that your bank will approve your offer for a short sale. However, you’ll find there are some steps you can take to enhance the likelihood of approval.
Part of the request for a short sale is that the short sale Bank will request your authorization for third-party. This means that third-party would have access to your personal information, something most individuals want to avoid.
However, it’s important to know that without the approval for the authorization you will be looking at slimmer chances of your application being approved.
Choosing the Right Short Sale Bank
Another way to increase the likelihood of having the application approved is by choosing a short sale bank with a reputation for approval.
This may mean looking into public records for previous property sales to see exactly which banks take on the most short sales in your area.
Bring in a Backup Offer
If you can come to the bank with more than one offer pending on the property this is a great way to show the bank that your short sale is a wise investment choice for them.
This will provide the bank with some security in case your current potential buyer falls through. The bank knows it will not be left with the house on their hands.
Why a Bank May Reject Your Short Sale Offer
In some cases, a bank may flat out say no to your short sale offer. This can be due to a number of reasons that in some cases can be adjusted for a secondary application.
These reasons often include a short sale list price that seems too high, a poor short sale definition, an incomplete short sale package, or that the seller or buyer simply does not qualify.
In some cases, it may already be that the bank has sold your loan and no longer is the one to be negotiating with. In this case, the bank has no say as to what can and cannot be approved in terms of the loan.
Educating Yourself on Short Loans
The best thing you can do when presenting an offer to a bank is to have as much information to back you as possible. Spend some time doing the necessary research to increase your results of a solid bank short sale transaction.
If you’re looking for more information on what to expect from your short sale, check out our Blog on 7 things you never knew about the short sale process.
You’ll find that these tips and information can be incredibly useful when it’s time to put your house on the market or to submit your application to the bank.