Short Sales in Minnesota
During these trying economic times more and more people in Minnesota are turning to short sales to avoid foreclosure. Short sales are the process in which the mortgage company agrees to settle for less than what is owed them on a property.
The process involves a lender discounting a mortgage because of financial hardship. In such an agreement the home owner sells the property in question for less than what is still owed the mortgage company. This is often the most economical solution. The lender suffers a smaller financial loss compared to a foreclosure or the potential loss incurred due to continued non-payment. It can also afford the home owner the possibility to lessen damage to their credit. Typically faster and less expensive than a foreclosure, a short sale is a more attractive recourse for both the lender and homeowner. The process does not remove the remaining balance, the difference between the sale price of the property and the amount owed the lender, unless settlement of the debt is agreed to in advance with the lender.
There are two main reasons for short sales. The first would be that the seller has suffered some sort of hardship, such as unemployment, divorce, a medical emergency, a job transfer that takes them away from the community, bankruptcy, or even death. The second reason would be that the seller owes more on the mortgage than the home is worth.
In the event this happens the seller will need to prepare a financial package for submission to the bank. Each bank has its' own guidelines, but the general procedure is similar from bank to bank. The seller's package will most likely consist of a letter of authorization which allows the seller's agent to speak to the bank, HUD-1 or preliminary net sheet, completed financial statement, seller's hardship letter, two years of tax returns, two years of W-2s, recent payroll stubs, last two months of bank statements, and a comparative market analysis or list of recent comparable sales.
When a real estate investor is looking to purchase a distressed property the process can be just as intense and complicated. Real estate investors can frequently make very profitable purchases of real estate through a short sale, but many of these do not get approved or fail to result in a formal closing for a variety of reasons. Buyers may find themselves waiting a very long time to get a response from the bank. It is important for the listing agent to frequently call the bank and keep careful notes of the process. Buyers may get tired of waiting for short sale approval and may feel the need to cancel if they don't get an answer within a quick enough time period. This type of attitude is self-defeating and does not speed up the short sale process. If a buyer has little patience or expects quick results, perhaps a short sale is not for them.
All of this is essential to a successful short sale. Sellers and buyers alike should work with their realtor to ensure the process goes smoothly and all of the required documentation is in good order when submitted to the short sale bank.
About the Author
Realtor Peter Dokken is a real estate agent in Rochester MN specializing in short sales and new home purchases in Southeast Minnesota.
Tell others about
this page:
Comments? Questions? Email Here