In short sale negotiations and closings, title companies help negotiate a sales agreement that is lower than the mortgage the seller owes. These types of discussions are sometimes tricky since they require the approval of all parties to accept the loss on the homeowner’s debt.
Short sales are often the last option for homeowners when there is a significant change in the value of their residential property. Sometimes, the mortgage becomes higher than the value of the house. In other cases, homeowners may be undergoing financial hardship, and they can no longer afford to pay off their debt.
The transactions that involve short sale negotiations are also sensitive and need a compassionate team of experts to make the process easier. Since short sale negotiation consists of exchanging information about the homeowner – often regarding finances and hardship – you need a specialist who understands how difficult this is for you and your family.
Short sales require a wealth of proof and negotiations, and the services of a trustworthy and ethical title company are paramount during this time. During this process, there are a series of factors that homeowners must disclose to close a short sale successfully.
Negotiating a Short Sale
During a short sale negotiation process, a series of factors determine whether the loan originator will agree. The factors include:
- The financial state of the residential property owner
- The ability of the owner to show that she or he is in financial distress
- How much the property costs in its current state
- The amount it will cost the lender to place the home for resale
- Marketing, maintenance, and repair costs
In some cases, lenders do not agree on a short sale unless the only other option for the property is the threat of foreclosure. Other factors include the property not being worth refinancing and reselling in its existing state.
Proving Financial Hardship
Because a short sale involves the loss of money for lenders, there is a strict process that homeowners must go through to show that they are undergoing financial hardship.
For the lender to agree, the borrower must prove:
- Financial Insolvency
- Due to unemployment and the inability to find a job, the borrower cannot pay their mortgage
- The borrower experienced a significant life event such as a divorce or death of a partner rendering them unable to make the payments
- The owner or a member of their family is experiencing a medical illness that requires exorbitant medical expenses that prevent them from making their mortgage payments
- The homeowner was part of a debilitating accident that no longer allows them to work
- The employer of the borrower moves them to a different area, and they are unable to pay for or sell their property
Even when there is an evident financial hardship, it may be difficult for the borrower to navigate the process on their own.
At Assurity Title, we identify any and all title issues. We work transparently and compassionately with homeowners, helping them make the best decision when it comes to short sale negotiations and closings.