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There is nothing short about a short sale – but help may be on the way
Posted by: Marlyn Wiener
January 24, 2010
Topic: Short Sales
A financially qualified buyer is a buyer who is either a cash buyer and can demonstrate liquid funds adequate to pay the purchase price and closing costs or who has a prequalification letter from a reputable lender indicating that the buyer is qualified to obtain the mortgage loan that the buyer will be applying for.
The second part is the determination of value. The purchase price agreed to by the buyer and seller must be approved by the seller's lender(s). The seller's lender(s) will order an appraisal of the property to determine if the purchase price offered accurately reflects the fair market value of the property. Obtaining a reliable appraisal is a challenging task in a declining market where there may be few comparable sales or the comparable sales are also distress sales; foreclosures or short sales.
The third part is the analysis of the financial status of the seller to determine if the seller has the ability to pay all or part of the deficiency - either at closing or over time after closing. This typically requires submission of a lengthy package of documents; last two years tax returns, last two months bank statements and pay stubs, financial statement and hardship letter.
The length of time to process a short sale and actually get to closing of the sale of the property varies but can take six to eight months, and in some cases, even longer due to the unprecedented volume of short sale applications before the lenders. In response to criticism of the delay in approving short sales, the Treasury Department has announced a new plan effective April 5, 2010 that will hopefully streamline the process by providing for standardized documentation and a shortened timetable for review. The program provides for financial incentives for the lenders and the borrowers to complete the short sale but only applies to certain loans; loans of less than $729,750 made before January 1, 2010 on a homeowner's principal residence.
