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Short Sale | Best Loan Modification:
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A short sale is when a lender agrees to accepting less than the total amount the borrower has left due on their home loan. The "deficiency" is the difference between the amount owed and what the bank collects at the short sale. Lenders usually will accept a short sale to avoid the time and expense of foreclosure. Lenders are not required to accept all short sale requests.
Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose. In some areas of California, it is reported that some 32% of home sales are short sales.
In the case of a short sale, the lender will require a formal offer and usually request a hardship letter. A hardship letter is telling the lender why the homeowners are not making their mortgage payments. Sometimes they will request bank statement, pay stubs, income statements, and so on. Be prepared to send them everything they ask for because if you don't it will not be accepted.
They will almost always ask for a HUD-1 and a real estate purchase and sales agreement. You must send everything to your lender as soon as possible. It usually takes 3 weeks or more to get an answer back from the lender. Next in the short sales process is the BPO. This stands for Brokers Price Opinion and is when a real estate agent comes out and gives their opinion on what the house is worth.
There may be other consequences of a short sale, such as tax ramifications. Except for certain conditions pursuant to the Mortgage Forgiveness Debt Relief Act of 2007, the I.R.S. will consider debt forgiveness as income. Please review the Mortgage Forgiveness Debt Relief Act for more information and how the act may protect your from additional taxing.
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