If you’re struggling to make your mortgage payments, there’s an option that falls somewhere between struggling to stay in your home and losing it to foreclosure — it’s called selling your home in a Short Sale.
The term Short Sale does not mean you sell your home quickly… it means you will be selling your home “short” of what is owed to your lender. Selling a Short Sale listing is MUCH more complicated than a typical transaction, but the process is not much more complicated for home sellers, with the help of a great agent
Most sellers who complete a successful Short Sale minimize the damage to their credit scores. Having a foreclosure on your financial records would be disastrous… one of the main questions when applying for a mortgage loan is whether you’ve had a foreclosure in the past. Having to answer yes to that question could end your hopes of buying a home in the future. Some lenders say a foreclosure can cause a 300 point credit score hit, while a Short Sale may have half that affect. This is just one consideration and every person’s situation is different.
The Mortgage Debt Forgiveness Debt Relief Act of 2007 made it much easier to complete a Short Sale without owing taxes on the amount of the loan your lender let’s you off the hook. Tax laws are constantly changing and it’s important that anyone considering a Short Sale contact a certified public accountant with any tax-related questions.
While a Short Sale will follow many of the same procedures as a typical real estate transaction, there are differences. In many cases your lender will want to see a contract on the home, before considering a Short Sale. Buying a short sale thus takes longer. For the trouble and time they’ll spend waiting to hear if the Short Sale will be accepted by the your lender, home buyers will expect to buy the home below market value. A special Short Sale Addendum will be included in the contract explaining the short sale will not go through without the approval of the your lender. The buyer’s inspection process usually doesn’t start until AFTER the lender has said they approve of the Short Sale. Also, because a Short Sale seller is financially drained, it’s understood that Short Sale listings are being sold as-is and no repairs will be made.
A Short Sale seller will have to complete a Short Sale Package. This is standard when requesting the lender to accept less than what’s owed on the home. This info must be filled out completely and accurately. Anything less threatens to ruin your chances of selling the home. In most cases, time is not on the seller’s side and avoiding delays is critical. Most lenders are willing to consider a Short Sale because they want to avoid taking back and owning another property through foreclosure.
Remember, a Short Sale can be as much a way out of the situation for the lender as it is for you, the seller. But also keep in mind that if your lender will clearly do better foreclosing on the home (than accepting a proposed Short Sale), they’re likely to go that route. So putting together a whole Short Sale package that works for the lender, is one of the most important steps in the Short Sale process.
If you are having trouble making your mortgage payments and have documentation/info that will show your lender a clear picture of what’s changed in your life since you took out the loan, you have an excellent chance of selling your home in a Short Sale.
Beware though not ANY agent will know how to handle a Short Sale. It’s imperative that you hire an agent who knows what they’re doing. To get the process started, schedule a no obligation appointment with us. We have experience in both buying and selling homes in a short sale. We give our Short Sale listing clients and listings the same special attention as all our other listings. Let us relieve your stress by allowing us to help you sell your home in a Short Sale.