FHA loans have a very specific set of guidelines that must be followed in order to complete a short sale. The first step is for your mortgage company to be contacted to inform them of the intention to sell the property via a short sale. An FHA loan generally requires that the borrower occupy the house at the time the house is being marketed and put under contract. There are exceptions to this rule so if you’ve vacated, make sure your agent inquires as to what guidelines pertain to you. There will be other financial considerations that your lender will want to review before they make the determination if you and your property qualify.

If you and your property both qualify for an FHA short sale, the next step is for your lender to complete an appraisal. This valuation and other information will be submitted to HUD (Department of Housing and Urban Development), which administers the FHA loan guarantee program, for their review. If approved, a document titled an “Approval to Participate” (ATP) will be issued from your lender that will outline the guidelines of marketing your home as a short sale and what terms must be met in an eventual contract to sell the property in order for HUD and your lender to approve the short sale.

An important part of the ATP stipulates your property must be listed for sale with a real estate agent. HUD and most lenders reviewing short sales of all kinds typically won’t approve a short sale on a “for sale by owner”. It is therefore important for you, as the owner, to find a knowledgeable and experienced short sale agent to complete the process. We have closed hundreds of such transactions in the Kansas City metro area and Johnson County, KS. We are in contact with lenders every day working on completing short sales in Overland Park, Leawood, Prairie Village, Lenexa, Olathe, Gardner, Shawnee and other Johnson County, KS communities. Let us know if you’d like a no cost, no obligation review of your situation.

Maybe, unfortunately, is the best answer. While there are some instances, such as those where Fannie Mae and Freddie Mac own the mortgage that require the borrower to be late, not all lender/servicers/investors have that requirement. Also, while some have the requirement, most lenders are more willing to review a short sale wherein a borrower isn’t behind on the monthly payments. This is a welcome change as lenders continue to look for ways to reduce the number of properties that become bank owned.

Fortunately as discussed in earlier posts, lenders have finally come to the conclusion that in order for the real estate market to stabilize, the rate of foreclosures must subside and the inventory of bank owned homes and soon-to-be bank owned homes has got to be absorbed. As long as record or near record foreclosure rates persist, the real estate market and the economy as a whole will continue to languish in the dolldrums. The much needed market correction will play an integral role in the recovery of the overall economic health of the country, renewed positive consumer sentiment, increased investment by existing businesses, formation of new businesses and, eventually, an increased hiring resulting in lowering of the persistently high unemployment rate. Also as mentioned in another post, the Congressional Budget Office recently reported that the unemployment will likely be at elevated levels until 2016. Obviously, the sooner the real estate market can return to more “normal” levels, the sooner the negative pressure from the housing sector will cease to be a drag on the unemployment issue.

Establishing a hardship continues to be an important ingredient in getting a short sale reviewed by a lender quickly and successfully. Showing obvious financial distress by a borrower not being able to make one or more payments due to their lender certainly helps. If you’re not behind, that doesn’t mean you won’t qualify and a short sale may still be your best option and one that can be negotiated with your lender. What is more important that a borrower being behind is for the borrower to make sure you have an experienced and knowledgebable real estate agent on your side.

If you’re behind on your mortgage payments and are considering your options give us a call or send us an email. A no cost, no obligation review of your situation can be completed right in your home.