Foreclosure or Short Sale?

Foreclosure or Short Sale?

If you have been threatened with foreclosure by your lender or received a Notice of Election and Demand for Sale that starts the foreclosure process, you may want to consider a pre-foreclosure Short Sale as an alternative to foreclosure. This alternative is typically used when a property owner owes more on the house than its fair market value and has minimal or no cash flow or assets.
Short Sale Advantages:
1.     Possible waiver or negotiated settlement of any further liability on the debt owed to the Foreclosing lender.   (Cancelled debt may be treated as ordinary income.)
2.      Obtain a fresh financial start by stopping the foreclosure action.
3.      Avoid potential bankruptcy.
4.      Commission of Realtor and cost of sale to be paid from proceeds of the lender.
5.      Lender gets fair market value sooner; less costly than foreclosure
Key to a Successful Short Sale:
1.     Using a Competent Realtor-
The first key to a successful Short Sale involves the use of a Realtor. A Realtor will guide you through the process of actually listing and selling your property together with negotiating with the foreclosing lender to accept a purchase contract for fair market value of the property. In the Short Sale process, the Realtor’s commission is paid as an expense of sale by the lender.
 
2.     Convincing the Lender of Fair Market Value-
The lender must be convinced that it will be receiving the current value of its collateral without the additional time and expense of the foreclosure process. A Realtor is the best choice for establishing the fair market value and sales price of your home.
 
3.     Convincing the Lender of Financial Hardship-
A Short Sale also requires establishing that the property owner has little or no cash flow or assets and that a long term financial hardship or insolvency exists.  A Realtor can assist you in completing a Financial Statement supported by income tax returns, pay stubs and bank statements.
 
4.     Negotiating with Junior Lien Holders-
Junior Lien holders must be convinced to voluntarily release their liens on the property to allow the Short Sale to be completed. A Realtor will negotiate any necessary financial arrangement with the junior lien holder and will work with the title company to prepare the documentation necessary to remove the lien from the property.
 
5.     Convincing the Lender to Approve Sale-
The lender must agree that the proceeds of the Short Sale as shown on the HUD-1 settlement statement is as much or more than will be realized through the Foreclosure process. Your Realtor will obtain the written approval from the lender.
 
Property Owner To Do List
  
1.      Choose a competent Realtor familiar with Short Sales to assist you.
2.      Execute all Colorado Real Estate Commission Forms provided by Realtor.
3.      Execute written authorizations for Realtor to negotiate with lien holders.
4.      Keep and organize all written correspondence from the lender and Attorneys.
5.      Complete a Financial Statement supported by:
A.      Pay Subs
B.      Tax Returns
C.      Bank statements
6.       Document hardships affecting the ability to make further payments such as medical illness, divorce, loss of job or reduced income.
7.      Document serious problems and costs of repair to the property.
8.      Keep the property in marketable condition.
 
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United Property Brokers | www.ersellsdenver.com
3515 S. Tamarac Dr., Suite 100, Denver, CO 80237  Ph: 303-671-9311