Preparing a Short Sale Letter Offer

A short sale is when the homeowner does not have any equity. In other words, they owe more
than the home is worth on the open market. Because of the FHA Loss Mitigation
Program lenders have the authority to aid homeowners in times of distress. Often
the HUD/FHA will sell the home for the appraised value. This can save the homeowner
thousands of dollars and could create equity.

If you are a homeowner in danger of being foreclosed you do have a few options.
One thing you could do is seek a buyer who is willing to pay the appraised value
of the home. Then you could have the buyer negotiate a short sale with the lender.

In order to negotiate a short sale buyer need to get in touch with the lenders

loss mitigation department. Some banks claim to not have a loss mitigation department.
In reality their department may go by another name. Buyers need simply ask if
the bank has a short sales department, a work-out department or a foreclosure
department. If that fails the buyer should explain the situation in detail to
be directed to someone who can help.

Once in contact with the loss mitigation department the lender will likely
seek a broker's price opinion (BPO) from a local real estate broker. The
buyer can offer to purchase the home for the appraised value rather than the
mortgage balance if the lender is willing to accept a short payoff.

The bank will likely want a letter of financial hardship from the homeowner.

This is basically a document saying the homeowner is not in a financial position
to pay off the mortgage. In addition to the hardship letter the bank will likely
want a HUD-1 Settlement Statement. This shows how money is dispersed. The bank
will look for red flags like excessive commissions to the seller. The bank may
help out the seller but they are not about to be easily taken advantage of.

If the bank is willing to accept a loss to get the default loan off the books
and help the homeowner they may accept the short sale offer. However, this is
not always the case. If the bank thinks they can make more money by repossessing
the property and selling it on the open market they have every right to that
option.

Short Sale Tips:

1. Be honest! If the lender finds out you are trying to take advantage of them
they are not likely to entertain any short payoff offer.

2. Make sure the short sell offer letter is not seen to be coming from an investor
but rather a buyer.

3. Make sure you have financial statements, pay stubs and bank statements to
back the hardship letter.

4. Understand loss mitigation for foreclosure prevention and to avoid bankruptcy.