A California short sale process is never too easy for the sellers – as it disturbs the credit rating of the sellers, apart from making them lose the property, without them gain anything in return. The bank or the lender also goes through considerable hassles – in the form of cost for the legal processing of the documents, not to mention the settlement of the due mortgage in many cases. It is only the buyer who can make a profit out of the California short sale process – in the form of a worthy investment at a lower price than the market prices.

Finding a good realtor or sales representative is important, so as to be able to negotiate the costs for California short sale process properly. A realtor would also help in bringing in good property deals, according to the preferences specified by the buyer. Making an offer that is acceptable by and sellers and the lenders alike is not difficult- it just takes being patient and observant about the market prices.

The California short sale process deal can then be closed successfully after negotiation, after the lender has transferred the necessary documents to the buyer.

Typically there is a higher risk of being pursued for a deficiency judgment when there is more than one mortgage obligation.

Short sales are where a property is sold for less than what is owed on the property.  The lender forgives the debt and takes the loss.  Since the bank won’t be receiving 100% of the their loan repayment, there is a special approval process on buying short sales which can lengthen or cause the process to be longer.

The process of selling a short sale property begins like traditional sales, in which the buyer and seller are negotiating the written offer.  But there is an addition to the contract, stating “Subject to Lender Approval”.  Since the bank is losing the money, they need to approve the final price for the transaction.

Sometimes getting approval from the lender can be a time consuming process, but other times it can be surprisingly quick.  Be ready for anything with short sales.  Your offer could be rejected.

To guide you through the complicated process, picking a real estate agent familiar with short sales may help may it easier for you:

1. Closing dates could be delayed – It is inveitable in a short sale that a closing may be delayed past the typically normal closing from 30 to 45 days.  It could take much longer than that.  It all depends on the bank.
2. The offer is rejected – The bank may receive multiple offers during the long approval process.  Of course, they are likely to pick the best one.
3. Multiple liens on the property – Many homes going through short sales have multiple mortgages on the house.  If you have more than one to deal with, you are guaranteed that it will take longer to close the deal.  Both banks need to agree to payoff amounts.  Usually the first mortgage holder is paid back in full where the second holder is the one who gets the loss.  Thus, the 2nd mortgage holder will try to negotiate with the 1st mortgage holder to get something out of the deal.  If the bank doesn’t approve, the deal may go nowhere.  It takes both banks cooperation to close the deal.
4. There isn’t much you can do to speed things up – The agent is powerless.  All they can do is call the bank over and over and over again.  There is not much you can do to make the bank decide on the deal faster.  A lot of times they are already buried in a lot of short sales.
5. Is it a good deal? – Just because the home is being sold at a discount, doesn’t mean it is a good deal.  Make sure to research the local area.
6. Other fees and costs – Sellers are not responsible or likely in this type of short sale situation to take care of repairs.  The buyer’s agent commission may get reduced by the bank.

Short Sale List Prices

The list price of a short sale home has little bearing on the actual acceptance of the bank on the purchase.  The list price may be too high to attract an offer, but if it’s priced too low the bank may not accept the offer.  Some agents advertise short sales at unbelievable prices, in hopes a buyer will be willing to submit an offer.  There is no guarantee if the seller accepts the offer that the bank will agree to a short sale.

Short Sale Definition

Short sales happen when a bank agrees to accept less than the amount of the mortgage the seller owes to the bank.  The property may have 2 loans or one loan.  If it has two loan, then both lenders must agree to accept a short sale.

Why Banks Reject Short Sales

Banks demand plenty of documentation before approving a short sale.   Sellers do not need to be in foreclosure or have fallen behind in making payments on their mortgage for a short sale to occur.  Here are a few reasons why a bank may turn down a short sale request:

• Short Sale Price is Too Low – Banks will request an appraisal and will order a BPO to get an idea of how much the property is worth.  When the listing agent submits the short sale offer, the agent must include a comparative market analysis to justify the offer price.  If the bank thinks it can make more money through foreclosure proceedings, the bank will reject the offer.
• The Short Sale Package is Incomplete – Many times the bank will lose documentation.  Every single document is required for a sale to be granted.  Make sure to ask for a list of documents, make copies and send the complete package to the bank or lender.
• The Seller Does Not Qualify – If the seller is asking for debt forgiveness, the bank will want to see a hardship letter to explain why the seller cannot afford to pay back the difference.  Sellers who have taxable assets are at a disadvantage if the sellers are unwilling to work out a repayment plan with the lender or bank.
• The Buyer Does Not Qualify – A desire to buy a home and the financial means to afford a mortgage payment does not mean a buyer qualifies to buy a home.  A buyer’s lender will look at credit history, length of time on the job, debt ratios, and other borrower qualifications.  To gain credibility with seller’s bank, the buyers must submit a loan prequalification or preapproval letter with the offer (pre-approval letters carry more weight).
• The Bank Sold the Loan – Sometimes the bank will not realize that they no longer hold the mortgage on the property till many months after the short sale negotiations.  If the loan has been sold to another bank, the bank has no authority to approve the short sale since they have released the asset.  The seller may continue receiving statements from the bank, the bank may be servicing the loan but may not own it.  Make sure to ask the title company to check the public redocrds for an assignment of deed of trust or other documents that reflect the loan has been sold and redirect the short sale package to the new lender.

Call Countrywide today at (800) 669-6650

Mortgage and home equity problems could be helped back on track with:

• Repayment plans up to 12 months
• Extensions from 1 to 3 months
• Modifications to the rate, term and monthly payment of your loan or line of credit
• Debt management programs with internal or nonprofit independent agencies.

Assistance can also be found with the Housing and Urban Development (HUD) can help you too.  HUD is a government agency that i ncreases home ownership and supports home buyers.  HUD offers free or low-cost counseling throughout the country.  To find the nearest counseling agency in your area, call (800) 569-4287.

Next steps…

Call Countrywide and be prepared to discuss income and expenses.  Make sure to have the following:

• You loan number and property address
• A brief explanation of your circumstances
• Recent income documents (pay stubs, benefit statements from Social Security, Disability, Unemployment, Retirement, or Public Assistance.  If you are self-employed, have your tax returns or year-to-date profit and statement available for reference)
• Bank statements and tax returns for the past 2 years

There are quite a number of reasons a bank will consider a loan modification.  Here are a few acceptable reasons:

1. Income change (to negatively impact paying your bills)
2. Loss of Job
3. An adjustment of your interest rate when your loan is an ARM
4. Death or Illness in the family
5. Relocation of homeowner
6. Divorce of principals on the loan
7. Increased financial burden (unexpected debt, law suit settlement, etc.)

If one or more of these hardships apply to you, you’ll need to craft a convincing letter to spell out your hardship: how you ended where you are now and why a loan modification will solve the problem.  Do not included information that is false, you need to be honest…do not place yourself in a difficult situation if the bank asks for confirmation on the information stated in the letter.

The lender will most likely will require your financials such as recent statements of income, expenses and more.

The buyer must have approved funding to convince the bank that they are serious about the transaction.  They can still obtain an inspection, but the bank will not pay for any repairs.  This is why most offers on short sales are far below the value of the home.

Short sales are a great solution to foreclosure and it’s important to hire a realtor who specializes in short sales and foreclosures to get your highest chance of getting it completed.