Short Sales - Important Info
I hope to provide you information to help you understand more about short sales and if you should consider doing one. Having knowledge that will help you make decisions is important to me. This is just a summary - short sales are complicated. Before deciding to do a short sale, you should consult with a tax accountant and/or attorney. If you're having financial troubles with paying your mortgage because you've experienced a major financial setback like losing your job, or you need to sell for whatever 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 and all proceeds from the sale go to the lender - you can't receive any money. The lender either forgives the difference or sometimes gets a deficiency judgment against the homeowner requiring him or her to pay all or part of the difference between the sale price and the original value of the mortgage.
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 go to the short sale option without 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 to Expect
If your bank won’t approve a loan modification, 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 some short sales and more and more short sales are being completed successfully lately. The reason for your financial trouble should be new -- 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.
If the lender thinks it can get more money from foreclosing on your home than from a short sale, the lender may not allow a short sale. Additionally, if anyone has co-signed on your loan, the lender may want to hold that person responsible for payment rather than doing a short sale.
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. Once you determine that the bank is willing to consider a short sale, it is time to find a good Realtor who is experienced with short sales. And just as important, 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 high-priced professional 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 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. These may include bank statements, medical bills, pay stubs, a termination notice from your former job or a divorce decree and a hardship letter. Your lender will carefully scrutinize the information you provide.
If you still have cash assets, the lender may expect you to use them to continue making mortgage payments or to make up some of the shortfall between the sales price and the mortgage amount. An attorney experienced in completing short sales can help you with this if you find yourself in this situation.
Don’t Hold Your Breath
Short sales almost always take longer than regular home sales -- considerably longer -- and sometimes the houses end up going through foreclosure anyway. Sometimes buyers find another property while waiting for an answer from the bank. Be prepared for this possibility Also, a short sale will damage your credit but it will be less damaging than a foreclosure.
Call Pedersen Real Estate at 951-840-5212 if you are in financial trouble and are thinking of doing a short sale. We can answer your questions and help you through all the many and often frustrating steps of a short sale. We are experienced short sale Realtors.
Posted at 09:55PM Mar 10, 2010 by The Pedersen Team in Real Estate | Comments[0]
