A short sale, or pre-foreclosure sale, occurs when the net proceeds from a property are less than the current lien on the property. The lender must approve the transaction, accepting a “short payoff.” Oftentimes, lenders prefer a short sale over foreclosure.
These types of sales are a large part of today’s real estate market. However, the transactions can often be complicated and sometimes overwhelming. Therefore, it’s important to fully understand the short sale process and its key elements.
Key Elements of a Short Sale Escrow
- The first key element is the preliminary report. This report includes information about the current property’s ownership status, address, current mortgage and lien details, and information regarding taxes, judgments, and delinquencies against the home.
- The next step is the letter of authorization. This is a formal letter from the seller giving permission for the lender to speak with authorized parties about the sale, including escrow officers and assistants.
- This next one is an important one – the estimated settlement statement. This statement shows the disposition of funds in the short sale escrow. Basically, it tells the lienholder what they will net from the sale. This document is sometimes revised during negotiations.
- Approval letter: This letter explains the conditions under which the lender is willing to approve a short sale. It is important to pay close attention to deadlines and other conditions listed in this document. Approval letters usually expire in 30-45 days. Be sure to track these dates and close the sale before the letter expires. Quick note: Short sale negotiations do NOT stop the foreclosure process!
- Lastly, make sure to maintain open and honest communication with the lender throughout the process. Inform necessary parties of any changes or updates, as it is crucial for the short sale transaction.
How We Can Help
Our team has the expertise necessary to help you navigate the short sale process. We promise to be transparent with you, making the transaction as smooth as possible. Feel free to reach out to us today with any questions!