Short Sell Your House - Get Educated
Short selling your home is not a decision you should make lightly. It is often a difficult and long process. If you are successful, the difference between what you sell the house for and what you owe on the house is forgiven. You'll also avoid a foreclosure on your record.
Step 1 - Get Educated
You need to know your options when it comes to your home. If you want to keep your house, but can't make the payments and you owe more than your home is worth, you may look into filing bankruptcy. This will stay the foreclosure process (not forever) and may allow you to stay in your home and repay your lender under different terms.
Deed in Lieu
If you owe more than the home is worth, this is not an option for you. Deed in Lieu means that you give up the house to the bank and walk away. Ie, you give up the deed instead of facing foreclosure.
Short Sale
If you owe more than your home is worth, and don't want to declare bankruptcy or face foreclosure, then a short sale of your home is the best option. A short sale does have potential tax implications.
Step 2 - Get Some Help
This is probably the biggest tip I would give to people who want to sell their home in a short sale. FIND AN EXPERIENCED REAL ESTATE AGENT WHO HAS DONE A SHORT SALE BEFORE. Your real estate agent will be able to deal and negotiate with the mortgage company(ies) on your behalf. An experienced short sale agent will give you a much better chance of successfully short selling your home.
Because there is often so many different entities involved in a mortgage (1st mortgage, 2nd mortgage, the investor on the loan, etc) you really don't want to do this on your own, with no experience. Yes, the bank pays all the commissions to the agent, Now you have a much better chance at getting your debt forgiven with a successful short sale.
WARNING! Just because an agent says they specialize in "short sales" does not mean they have actually successfully done one! There are many classes agents attend regarding short sales, but nothing compares to real world experience.
Step 3 - Get Started Now
The longer you wait to get started with the short sale process the less chance you have of success. Every state is different with their foreclosure process. You need to decide quickly to start the short sale process if you're getting behind on your payments, or have already received a notice of default.
Step 4 - Follow Instructions Exactly
An experienced short sale agent will tell you what you need to do to get the house ready to sell. Don't get too hung up about the price. If the agent wants to set a low price on the house, there is a reason behind that.
You need to price the home low to get an offer. You need a buyer that is willing to stick around for a super long closing or changes to the agreement. Don't get hung up about the price, all you should care about is getting the place sold.
Step 5 - Know The Tax Implications
While Congress may change this (and in my opinion, likely will with the waves of foreclosures happening and still waiting to happen) you will owe taxes on the debt that is forgiven in your short sale. If you are considered insolvent (your assets are less than your liabilities), you may be exempt from this tax.
Talk to a qualified tax attorney or CPA about this for your particular situation. Your real estate agent should know about this! A good agent will have a quality referral for you to handle the tax implications of your short sale.
Step 6 - Prepare to move quickly
Because your closing date may not be set in stone, you need to be prepared to leave your home quickly if needed. Usually you will have to move 2 months from the offer date.
Step 7 - Prepare yourself emotionally
If you are already in default, or have a foreclosure pending, this whole scenario and process of trying to short sell your home can be very emotionally draining.
You will receive solicitations from everyone and their mother. You may have people stop by your home while you are still there. It can be a very difficult process.
Make sure you have people in your life to talk to about your situation. You will need a support network to help through this time in your life. It will pass. And you are being proactive in seeking a short sale of your home. You are taking the right steps, and in time, everything will work out. I can't promise it will be easy, but you will make it!
Short Sale Specialist
ORANGE COUNTY SHORT SALE REALTOR
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