Short Sales are Often Wise, But They Take Jumping Through Lots of Hoops

The patience, guidance, and knowledge of paperwork in a short sale are tenfold to other real estate transactions. When doing a short sale hire a Realtor with experience and have them help you step by step through the tedious process.

Because of the decline in prices in many areas, sellers are trying to sell their homes now, albeit at a loss, to reduce the loss they may take in the future. When they are selling their home for less than what they owe the bank, it is called a short sale. This situation requires a bank to review an offer and determine whether it is better for the bank to accept the offer which is less than the outstanding loan, or not accept the offer and force the seller into foreclosure. The bank would then own the property and could rent, sell, or otherwise encumber it as the bank wishes. The bank’s decision is purely financial, and they have the control.

When you are in the business of money it is because you are good at money. That’s a positive way to consider a bank’s position. It doesn’t mean that you won’t have to adjust your business model periodically. It means that you will recognize when you must adjust your business model, and do it. So banks have done just that. No longer is money lent out liberally by banks. They lent all of the money they could lend liberally, and are now adjusting their business model.

So how do we deal with banks the most efficiently, you ask? The home seller must also adjust their business model when the market changes. If you bought your home because of appreciation factors that looked pretty consistent in your area, it would be likely that you depended on that appreciation as part of your financial plan. If you knew your net worth was increasing in your home, you probably felt like you could spend more elsewhere. You could eat more dinners out, see more movies, take more trips, etc. So in times when the appreciation was not so robust, wisely you would adjust your business plan and maybe take walks, ride bikes, go surfing, cook at home, and not go on extravagant vacations.

If you ended up in a market where the values unpredictably plummeted beyond what your day to day business plan adjustments could counter, you would consider a larger business plan adjustment, such as selling your home. If prices went down so far that you now owed more than your home is worth, selling your home would require permission from the bank.

Choosing to sell your home rather than foreclose should allow you to maintain a credit record that does not have a derogatory mark as impeding as a foreclosure. Typically, foreclosures stay on your credit record for seven years and greatly impact your ability to qualify for other types of credit, as well as another home loan. A short sale on your record should not be as detrimental.

There are a multitude of hoops that must be jumped through with certain precision to perform a successful short sale on your home. A Realtor can be the intermediary between you and the bank and make the process much less emotional and more streamlined. When you finish your short sale, having adjusted your business plan as necessary, you will walk away with your head up high because you took the necessary steps at the correct time to keep your “business” afloat.