How to do an FHA short sale
Here are the steps required in order to successfully complete an FHA short sale:
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1) The borrower, with the help of a short sale Realtor or on his/her own, submits required documentation (short sale pre-offer package) to the Servicer of the loan (Bank Of America, Chase, Citi, Wells Fargo, etc).
2) The Servicer reviews the documentation and requests any missing information to make sure that the borrower qualifies for the FHA’s Pre-Foreclosure Sale Program (PFS).
3) The Servicer orders an FHA appraisal on the property to determine current market value.
4) Provided that the borrower and the property meets all of the requirements, an Approval To Participate (ATP) letter is issued by FHA to the borrower identifying the timelines, required net proceeds, and financial incentives.
5) If the property has not been officially put on the market, the borrower hires a short sale agent who starts looking for buyers.
6) In the event, that the borrower fails to sell the home within a predetermined period of time and does not qualify for an extension, the property is put on a Deed-In-Lieu of Foreclosure track.
It is highly recommended to list the home on the market with a short sale specialist at the time of submitting the application to PFS. In today’s market, finding a buyer is difficult and requires time.
Contact us today to for a free and confidential short sale consultation and we will take you through the short sale process, step-by-step, until a successful completion.
Here are a few additional points dealing with the FHA short sale process:
The net required by the FHA decreases every 30 days since the issuance of ATP.
FHA offers financial incentives to the borrowers for participating in the FHA short sale program. It ranges between $750 and $1,000 depending on how quickly the sale takes place.
Presence of other mortgages complicates the FHA short sale process.
Oftentimes, the ATP will not be issued until other mortgages agree to the short sale and agree to receive a maximum of $2,500. The borrower may use the FHA financial incentive towards the repayment of other mortgages and liens.
Some rental properties do qualify for the FHA short sale program. The property must have been purchased as a primary residence and not as an investment and can not have been rented for more than 18 months.
Although FHA short sales are tightly controlled by the HUD, there are, at times, unexpected circumstances that arise and have the potential to complicate the process.
Are there other liens/mortgages on the property? Is the borrower in default? What happens to the deficiency in an FHA short sale?
The presence of variations listed above is the reason to make sure that you are working with an expert short sale Realtor who understands the process and has proven results.
To learn more about the FHA short sale process and for a free short sale consultation, contact us today and let our proven experience and knowledge of short sales work for you.