Who Gives the Mandate to Short Sale a House?

A short sale, also known as a pre-foreclosure, happens when the homeowners cannot afford their home mortgage and the house is worth less than its mortgage debt.

The lender will accept the proceeds from the sale even though it is not enough to cover the sum of money owed to them.

Parties involved in a short sale

A short sale can only be done with the lender’s permission. The sale can take a very long time because sometimes the lender may take months before making a decision of whether or not to accept the buyer’s offer. Even if the lender eventually accepts the buyer’s offer, it’s probably too late and the buyer has moved on to acquire another property.

Tips for the borrower

If you want to sell your house at a price lesser than the mortgage worth, there are certain short sale rules that are put in place to make the process easier and faster. These rules are a part of Home Affordable Foreclosure Alternatives (HAFA), a program whose aim is speeding up the lender’s decisions on short sales.

Another program, namely Home Affordable Modification Program (HAMP) together with HAFA sees to it that the short sale process runs easily.

Once a borrower qualifies for HAFA, he or she receives a ‘short sale agreement.’ Now the borrower and the lender or loan modification firm will work on parallel tracks.

The borrower has a 4-month deadline to sell the house which means that both the lender and the borrower has to work on a set deadline. If a buyer comes up before the deadline period, both the seller and the buyer will send a request for approval of short sale and the lender will give a yes or no answer within 10 days. The answer should be yes if the deal meets the minimum acceptable proceeds.

Mortgage insurers also have the power of stopping short sales. Since they are not allowed to add any loan modification cost in a HAFA short sale, at times, they are reluctant in approval of the short sale and of course, they have the option of saying no.