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Short Sale Approval: Tips For Getting Loss Mitigation To Approve Your Offer

May 24, 2008
Short sale approval can be a lengthy and complex process. Obtaining approval for short sales must be processed through the lender's Loss Mitigation Department. There are many steps involved with a trail of paperwork.

When lenders engage in short sale approval transactions they agree to accept a lesser amount than is owed on the mortgage note. Typically, a Loss Mitigator is assigned to the Borrower's account and reviews their situation to determine if they are eligible for this type of real estate transaction.

Short sale approval eligibility requirements include the following:

1) The Borrower must provide proof their home is worth less than the unpaid balance. Generally, this is accomplished by obtaining comparable home sale prices in the area where the Borrower's home is located. Comp reports can be obtained through Realtors or by conducting research via the Internet.

2) The Borrower must be default on their mortgage note by a minimum of three months. Additionally, the majority of lenders only consider short sales when the Borrower has no equity in their home. If the Borrower has equity or other financial assets, chances are high the lender will not agree to a short sale approval.

3) The Borrower must provide proof they are facing financial distress due to hardships such as extended unemployment, chronic health problems, bankruptcy, death or divorce.

4) The Borrower has no financial assets they can draw from to maintain mortgage payments.
Before granting a short sale approval, the lender generally offers the Borrower a variety of options such as a Loan Modification or Deed in Lieu of Foreclosure. Some lenders will suggest loan modifications which allow the Borrower to roll over the delinquent mortgage payments to the end of the loan. Other lenders will reduce mortgage payments for an extended period of time.

There are multiple options available to homeowners who want to keep their home out of foreclosure. Each comes with their own set of pros and cons. Therefore, it's vital to investigate all options and determine the best financial decision for you and your family.

Once the decision has been made to pursue short sale approval, certain elements must be in place. Generally, the lender will require the homeowner to have a Buyer lined up. This is best accomplished by working with a Realtor qualified to handle short sale transactions.

Finally, a short sale package must be provided to the lender. Although requirements vary from lender to lender, most lenders require the following information:

* Detailed financial statement outlining income and expenses
* Short sale hardship letter explaining the events that caused you to become delinquent in mortgage payments
* Current bank and investment statements
* Current year tax return
* Realtor listing agreement
* Signed sales contract
* Estimate settlement statement (HUD-1)
* Proof of buyer's financing

The short sale approval process is not for the faint of heart. It requires patience, tenacity, organizational skills and multiple phone conversations. However, short sales are far less damaging to your credit and less traumatic than the foreclosure process.

It is highly recommended to thoroughly educate yourself about the short sale approval process and work with qualified individuals who are well-versed in this type of real estate transaction. Short sale experts include Realtors, Real Estate Attorneys, Short Sale Specialists and Private Real Estate Investors.
About the Author
Obtain short sale approval and foreclosure tips from real estate investing expert Simon Volkov. Access a library of informative articles on real estate investing and creative selling techniques at http://www.SimonVolkov.com.
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