What Is a Short Sale?
First, it is important to remember that a short sale is not a short process!
Essentially, a short sale occurs when a seller sells a property for less than is owed to the mortgage company and the lender agrees to accept a payoff that is less than the balance of the loan. It is the market value of the property that determines the sale price and whether the sale will result in less money than is needed to pay off the loan balance.
You can do a short sale even if the value of your home is more than the mortgage as long as the net proceeds from the sale is less than the total balance of the moneys owed on the property.
For instance, assume that your home is worth $500,000 and that your mortgage is $475000. This scenario does not seem to be a short sale. However, once you deduct the seller closing costs including commission and transfer taxes, you may not have enough money to pay the mortgage in full. Once you figure out your seller closing costs, including the commission, you may find that sum could be as much as $35,000 or more.
$500,000 minus $35,000 in closing costs equals net proceeds of $465,000. In this instance, you are $10,000 short of paying off your mortgage. If you have $10,000 in the bank which you can bring to closing, you could do that, and then this sale would not be considered a short sale.
If you do not have $10,000 in the bank and you still want or need to sell, you can ask the bank to do a short sale. If the bank agrees to accept $465,000 as net proceeds, then your sale becomes a short sale.
If you need or want to sell your home but you fear that it will result in a short sale, then you should consult an experienced Realtor to determine the fair market value of your home. Once you are certain that you will not net enough to pay the loan balance off in full, you should contact an experienced short sale negotiator to help you through the process.
The negotiations with your lender are typically time consuming and paperwork intensive. When you present your situation to the lender you want to put forward your hardship in the most compelling way possible. You will have to provide the lender with information about your expenditures, household expenses and your assets, pay stubs, tax returns, and a lot of other information. The lender will order a valuation of your home to assure that the contract on your home is for fair market value. By working with professionals who understand the process and may have excellent contacts at your lender, you will save time and increase the likelihood of a successful outcome.
If you are in the DC metro area and are considering a short sale, please give the Lise Howe Group with Keller Williams Capital Properties a call at 240-401-5577 or email us at firstname.lastname@example.org. We will find a buyer for your home as you work with a negotiator to get the short sale approved.
Pursuing a short sale is an emotional roller coaster and you need to know that you have an experienced agent in your corner who is going to look after your interests. Good luck! You can get through this.