Short Sales - Can Doing One Help Me?

Shorts sales are complicated.  We hope to provide you information to help you understand more about short sales and if you should consider doing one or not. Having knowledge that will help you make decisions is important to Pedersen Real Estate.  We can’t give you all the information you need here. This is just a summary.  Before deciding to do a short sale, we urge you to consult with a tax accountant and/or attorney as there may be tax or financial implications.  If you're having financial troubles and are having a hard time keeping up with your house payments because you've experienced a major financial setback such as a divorce or losing your job, or you need to sell for another reason but your house is worth less than you owe, you may be able to avoid foreclosure through a short sale.   

What is a short sale?

A short sale is when a homewner in financial distress sells his or her property for less than the amount due.  Your bank has to approve a short sale and all proceeds from the sale go to the bank. The seller cannot receive any funds in a short sale and a seller cannot sell to a family member.  Sometimes sellers will be asked to sign a promissory note by the lender. 

Alternative to a Short Sale

Before deciding upon a short sale, talk to your lender about the possibility of getting a loan modification. Don’t seriously look at doing a short sale without first doing everything you can to work with your bank on a loan modification.  This option may allow you to stay in your home and get back on your feet. 

What Will A Short Sale Cost The Seller?

• Overdue taxes
• Back association fees (in reality they don't pay these fees very often)
• Payments to other lien holders

What's in it for the lender?  It costs much more money to go through with the foreclosure proceedings and they risk having more damage done to the house after it becomes vacant. Most of the time there are no costs of the short sale to the homeowner - but not always. 

There are some government programs available.  Click on the box to the side to find out if you qualify. 

What to Expect

If your bank won’t approve a loan modification, then a short sale may be a good choice for you.  Be prepared for a lot of work and a long wait to complete a short sale. Understand that lenders are not required to do short sales but most lenders do approve short sales.  They do not approval all short sales. Some short sale homes still end up going through foreclosure. The reason for your financial trouble should be a new situation for you such as unemployment or divorce. If the fact that you can’t afford your home anymore is due to something about your financial situation that you did not disclose when you originally applied for the loan, the lender will not be sympathetic to you and will not approve a short sale.

I am current on my mortgage, will my lender consider a Short Sale

The answer is, maybe. Some lenders will accept a short sale file for approval on loans that are not delinquent. Other lenders will not accept the file until the loan is delinquent. We can put your short sale file together within a couple days and submit it for approval. That is the best way to find out if your lender will consider a short sale on a loan that is current.

Moving Forward with a Short Sale

If you think you may be a good candidate for a short sale, talk to your lender’s loss mitigation department. If the bank is willing to consider a short sale, it is time to find a good Realtor, one who is experienced with short sales.  More imporatantly, you should consult an attorney, and/or tax professional. You may be thinking that there is no way you can afford to pay for these services at this time in your life, but you don’t want to find yourself in even bigger financial trouble. There may be financial and/or tax consequences that you should know about before deciding about moving forward with a short sale. 

What Information Will the Lender Need?

There are a number of documents that the lender will need from you to prove your financial hardship. The include bank statements, medical bills, pay stubs, a termination notice from your former job or a divorce decree and a hardship letter. The items required may vary from lender to lender. Your lender will either approve or deny your short sale based on the information you provide.

If you still have cash assets, the lender may expect you to use them to continue making mortgage payments or  pay a portion of the short sale through bringing some cash to closing or signing a promissory note for a portion of the shortfall. 

Don’t Hold Your Breath

Short sales almost always take longer than regular home sales. Sometimes buyers find another property while waiting for an answer from the bank. Be prepared - you could lose the buyer and have to start all over again.  Also, you should know that a short sale will damage your credit but is generally less damaging  to you than foreclosure.

If you are reading this then you are probably experiencing financial trouble and we understand how difficult this is.  Call us if you are thinking of doing a short sale.  We are experienced short sale Realtors. 

Read more information about short sales

IMPORTANT NOTICE:   If you stop paying your mortgage, you could lose your home and damage your credit rating.