Short Sale vs. Foreclosure
Many homeowners who purchased homes between 2004 and 2006 now find themselves in a bad financial situation with regards to the ‘value’ of their property. There is a large population of homeowners who find they can no longer afford their mortgage payments; either by design (i.e.: loan structure), job loss, economic issues or perhaps another hardship. Now they are looking for a way out of their dire financial situation and to avoid a ‘foreclosure’ on their property.
One option may be a Short Sale on their property. A Short Sale by definition is when the market value of the home is less than what is owed to the lender on the outstanding mortgage. The good news is that lenders are not in the business of owning real estate and the foreclosure process is an expensive process for them. The bad news is that you have to convince them that a short sale would be in their best interest over a foreclosure. Lenders do not automatically agree to a short sale just because you’ve asked them to. Nor do they just take back a home (i.e. hand over the keys) because you want them to. Although they are not fond of having any inventory on their books, they do want the money that is owed to them. And the more loans you have (i.e. a 1st and a 2nd etc) the harder you must negotiate. This can be a long and frustrating task, so here are a few tips you should have as a homeowner:
*The first thing to do is contact your mortgage lender(s) and verify what their ‘criteria’ is to qualify for a short sale. Some lenders will want you to apply for a loan modification first, before attempting a short sale.
*Next, you should contact a real estate professional who is experienced with the short sale process and the current market. Don’t be afraid to ask them how many short sales they have successfully done. By that I mean actually sold and closed. This is extremely important information. You want someone who knows all the in’s and out’s of the short sale process, and who can anticipate the lender's next request. Not all lenders and their conditions are the same, just as not all real estate professionals are the same. It takes a seasoned and experienced short sale expert to successfully negotiate and complete a short sale transaction.
*Be prepared. Have all your documentation ready ahead of time before you contact anyone. The banks are going to want bank statements, tax returns, recent pay stubs (if applicable) and any other financial documentation that shows either income or assets. They will also want a ‘Hardship Letter’. This is a letter stating why you can no longer pay the debt, and why you’re requesting the short sale. Remember that the more prepared and informed you are, the smoother the situation will be.
*And finally, be patient. There are a lot of short sale homes on the market today which means that there is also a lot of competition to obtain a buyer. The short sale process is a long one, but first you must have a viable buyer before you can even begin. This is also another reason to have experienced professionals working with you to be successful. The home must be priced and marketed correctly in order to sell it. If you can’t sell it, there is no short sale and the foreclosure process will continue to move forward.
Terrie Hunt, Broker/Owner
River Ridge Realty (916) 663-6300. “Outstanding Life Member” of the Sacramento Association of Realtors. DRE #01213387
www.RiverRidge Realty.net – Success and Experience Working For You