Given the large number of real estate professionals, not to mention the vast number of "do it yourself'ers"  in the real estate arena, many are questioning if they can short sell their own home. The answer, however, is a resounding NO. It is actually illegal for an owner to handle his or her own short sale. In fact, neither the homeowner themselves nor a friend or family member can short sale the property. A short sale must be an Arms Length Transaction, which means exactly what I have stated above. No one who is involved with the defaulted owner can assist them in the short sale process.

A short sale is when a bank or mortgage lender agrees to decrease the balance of the mortgage amount that is due, in order for a short sale to work and be successful. They would only agree to this process if the homeowner has a legitimate financial hardship. The bank or mortgage lender does not want the homeowner to profit in anyway from this process. If a friend, family member or the homeowner themselves conducted this transaction, the homeowner could stand to profit from any fees generated.

If a short sale has begun and the process is under review, and if the bank finds any evidence that this is not an arms length transaction, they would stop this process immediately and would not allow this homeowner to short sale their home. This is a sure-fire way to land in foreclosure.

Another
question about short sales is whether or not a defaulted homeowner can go down to their local bank branch or mortgage lender's office and talk to them about reducing their balance. Unfortunately, things don't work that way anymore in the banking business. Once you obtain a mortgage, it typically gets bundled with other mortgages and sold to other banks or investors.

Oftentimes, the company to which you make your payments is not even the bank who holds your mortgage; they are simply paid to "service" the loan. Also, once you mortgage lender begins the foreclosure process, the file is turned over to a loss mitigation company so the "lending" departments or the branch no longer have anything to do with the loan.

All negotiations of a short sale are done by a professional broker like myself and my short sale negotiation company. We deal directly with the specific bank's loss mitigation company. This is explained in more detail in the following video:



In my next article I will discuss what territories we do cover and what types of properties we can short sell. Tune in next time for another informative article on short sale area of real estate.