The small sale process can be long and tedious. It starts with the homeowner in a situation where their home has a lower value than the balance on their mortgage – the small sale definition. It usually becomes dangerously close to foreclosure before the homeowner accepts the probability that the home is lost and makes an agreement with the lender to start the small sale process.
Before the process can start there must be an agreement between both lender and borrower. It’s an agreement between two parties that involves many complexities. The most valuable aspect of the transaction for the homeowner is the avoidance of foreclosure.
The two parties first agree to the small sale, and then they must deal with all of the various and complex aspects of the bank small sale process. For example, they must choose how much of and the manner of the debt to be forgiven, the price of the home, payment of fees, and then deal with the buy agreement. It is absolutely vital at every stage to have the help of a professional. The small sale process is not to be done on your own!
The lender will require the homeowner to complete the “hardship letter” in order to clarify how they finished up in such financial distress. The borrower will be required to document statements in the hardship letter through pay stubs, investment documents, and bank statements. This will provide a historical time line leading up to the homeowner’s inability to pay.
In the end, the small sale process is done for the bank to be able to keep its losses at a bare minimum. For this reason the lender must have the home appraised by real estate professionals in order to to assess the honest market value. It is all about the bank trying to recover as much of its money as possible.
If the home is sold in accordance with the agreement – then the money will be used to settle the debt. The bank is not obligated to wait any longer than they agreed to wait in the contract. They can legally proceed with foreclosure if it is not sold by the date agreed to in the contract. These issues will be clearly stated in the agreement.
Just because you go through the small sale process, your credit doesn’t have to be ruined. There are many aspects to a small sale and many borrowers have missed deadlines relating to financial issues directly affecting their credit rating. Their credit was hurt as a result. Some end up with hurt credit due to having other areas of financial responsibility involved in the small sale process. Hurt credit is not a definitive result of a bank small sale. This is one of the more prominent reasons that we have to buy experts and then follow their advice.
Our primary goal is to complete the small sale process and end up with as small hurt as possible. If done correctly, we could end up with no unpaid property taxes, stable credit, legal fees paid, and without foreclosure. We may lose our home – yes, but we’ll be in the best position possible to buy again!
Perry Zohanson has been helping borrowers facing the small sale process for years. Be sure to check out his bank small sale blog for brilliant tips and free advice on how to best make the small sale process work for you.