A short sale is a process that permits a homeowner to get a discount on their home mortgage or mortgages, allowing it to sell at today’s deflated values without having to pay the difference to the bank. The ultimate goal of most homeowners is simply to try and mitigate damage to their credit while avoiding losing the home through a foreclosure action.
Maybe your Adjustable Rate Mortgage has gone up or you are suffering some other form of hardship that does not afford you the opportunity to remain current on your mortgage. Sometimes the best option is to negotiate a settlement with your mortgage company. Remember, if you are unable to afford your mortgage and your home is worth less than what you owe, a short sale may be one of your only options.
Once you have come to the realization that you can no longer afford the payments on a home that has lost value, the next steps you take are crucial. With the clock ticking, valuable time can go by if you simply do nothing. The most critical part is positioning your circumstance for review with the bank. Providing documentation supporting your inability to continue making your mortgage payment is of the utmost importance when working with your lender. Remember to provide anything that will help to illustrate your hardship. The more information provided the better chances of you receiving an approval.
Here is an example of how a Short Sale would work:
Home is appraised at $175,000
Payoff is $210,000
The lender agrees to sell it for $175,000 and allows you to walk away from the balance remaining. In most circumstances, the bank will actually pay for all the realtor fees and closing costs associated with the sale.
Who can help me??
There are many claiming to be short sale specialists in the real estate industry. Be careful, those claiming to be experts should be able to document such. Make sure the Realtor you chose can provide you a minimum of 5-10 short sale approval letters from various lenders. A one day seminar does not make someone an expert! This is not a job you want to leave in the hands of someone inexperienced. The agent who claims to specialize in short sales must be extremely knowledgeable and well versed in banking guidelines, loss mitigation procedures, tax issues and recourse vs. non-recourse debt. They should also have other professional references you can talk to regarding taxation and the lender’s ability to sue on recourse debts. Again, this requires knowledge and skill so ensure you are well represented.
For a rough overview and answers to basic short sale questions you can visit www.sacramentoshortsales.info.
Next month we will visit payment plans and lender modifications.
Stay tuned.