Short Sale Proposal

If you have found the home of your dreams and are pursuing a short sale, you had better be prepared to write a proposal to buy the property. In most cases, if you were smart you will have a real estate agent by your side to aid you in writing up a proposal that will get you in that home whether for an investment or for your self.

The proposal will include the application for a short sale, an authorization letter, and the purchase and sale contract signed by the seller and you. The contract will have the amount that you and the seller has agreed to prior to sending the offer to the bank. Do not think you are going to steal the property, the bank can rightfully ask for the full amount of the loan and they are not going to take an offer that will put them in red farther than a foreclosure would. The proposal must be a reasonable offer. This is where a real estate agent is loads of help. A real estate that works with short sales, can guide you in the right direction as the true value of the home, what other homes are valued at in the area, what the real estate market is like in the area, and of course, a pretty good guesstimate as to what the bank will accept as an offer.

In most cases, you will need a rather large down payment. The lending company does not desire to have another buyer that cannot make their payments. In the majority of cases, the lending company will not even look at a proposal until the seller is 90 days in arrears on their mortgage payment. However, a smaller loss now can be better for the lending company than a huge loss after a foreclosure.

In your proposal, you should include a letter from the seller giving an overview of the situation that has caused them to be in default on their home loan. The lending company must see that the homeowner does not have the means to repay the loan, before they look at another buyer. The seller will need proof and documents that show the situation that has caused their financial problems such as loss of employment, illness, or death in the family, divorce, etc… If the lending company believes the homeowner has the means to repay the loan, they are not going to agree to a short sale.

You will need a statement of the value of the property such as an appraisal. Of course, the lower the estimate the better. Write a list of all repairs that will need to be done, which will show the home does not have a good resell value. Include a list of costs and liabilities. You want the lending company to know the home is in bad shape, thus it will take longer to sell. The longer the lending company has the home the more money they lose.

Even though a short sale is always an “as is” property, you want the lending company to realize all the problems with the property. They will be ready to unload a home if they think it will be a hard sell.