The Owner of the Loan Has the Final Say
Proceeding with a short sale is a way to avoid foreclosure. Understanding or at least having a cursory understanding will help you the seller to have the patience required to go through the process. So, who has the final say on approving a short sale?
It is the owner of the loan that has the final say. You are probably saying well doesn’t the mortgage company I send the payment the owner of the loan? Not necessarily, most likely, the company you are sending your payment is the mortgage servicer. After a mortgage is made it is usually bundled with other mortgages (packaged) and the package is sold as an investment to another firm. The owner of the investment is known as an investor. The investor can be an insurance company, Fannie Mae, Freddie Mac, an investment firm, government entity, etc.
Is your loan owned by Fannie Mae? Fannie Mae Loan Lookup
Is your loan owned by Freddie Mac? Freddie Mac Loan Lookup
Your payment is sent to the servicer of the loan. The servicer works on behalf of the “Investor”. The servicer is task with communicating with the borrower and to collect the principal, interest, and escrow payments. The servicer is tasked to pay the property taxes and insurance on your behalf.
Short Sale 101
When doing a short sale (aka distressed sale), the final approval will be dictated by the Investor. The servicer of your loan will have guidelines set forth by the Investor. When the servicer has collected all the financial documentation from the seller (borrower) in addition to the listing agreement, sales contract, the buyer’s proof of funds, and proposed settlement statement the servicer will obtain an appraisal. The purpose of the appraisal is to determine if the sales price is within the guidelines set by the Investor. The appraisal amount and the sales price do not have to match.
In fact, a few years ago I did a short sale of a loan owned by HUD. The appraisal amount came in lower than the purchase price by $5,000. The mortgage servicer following the guideline of HUD required the buyer to pay less than the purchase price, in other words to pay the appraised value. And you wonder why the federal government runs a debt!
Short Sale Negotiations
When the short sale is approved the mortgage servicer will issue a written short sale approval letter stating the terms, costs, instructions, and a deadline to finalize the closing. What you want is for the Investor to waive their right to pursue a deficiency judgment. If the approval letter is not satisfactory to the seller (borrower) then you may continue to negotiate. Call it a counter proposal.
If you have any questions about avoiding foreclosure, a short sale, or battling the IRS, please send an email to Jack@PensacolaAreaProperties.org or call (850) 616-6377.
And remember to never give up. Stay positive and anticipate success.
Your Buy My House Guru & Friend,
Also, don’t let the unknown stop you from investing in property someday either. Contact us today to see how selling your one house today can lead to multiple properties for you down the road. Here’s a link to a brief article to start you in that direction. Call us anytime for more information at 1.850.616.6377!