To all my friends, clients and the confused....
So you want to sell your home, right? You owe more than what you can sell for, don't you? Scary words for someone to hear when getting ready to sell your home.
So what are your choices? What can you do? You don't want to risk going into foreclosure or file bankruptcy and risk losing everything. So what happens????
A Short Sale. A short sale is when you need to sell your home, but unfortunately, you end up selling for less than what you owe on the mortgage. Granted, the lender must approve the short sale because they are the ones taking less than what is owed. It is possible that the lender may say no to the short sale. They may decide that a foreclosure would be more beneficial to them financially. Tough to hear isn't it?
So here's what you need to do:.
- Talk to a Realtor. A Realtor who is experienced in Short Sales can help you with more than you could imagine. They have been through this before and will know what to help you with. It is a face-to-face that you will appreciate having. Also, this person will be able to list your home and upon selling will be a major contact for you with your lender. They will also provide you with a CMA (Comparative Market Analysis) and help you price your home according to other homes that have sold in your area that are comparable to yours.
- Call your lender/mortgage holder. Let them know you are interested in doing a "short sale" and you need to speak to someone who is capable of giving you a firm decision on whether they will do that or not.
- Talk to an accountant. There may be taxes you will need to pay at the end of the year on the sale.
- You will need to get the following paperwork together for your lender:
- Letter of Authorization (Including Name, Phone Number, Address, Realtor name & phone, etc); this gives them permission to contact the Realtor you are working with and to discuss your personal information pertaining to this situation.
- An Estimated Good Faith Estimate - Your Realtor can help you with this. It will show what you hope to get out of the sale of your home so the lender will be able to see what the proceeds may be. This will weigh their decision on the sales price decision. If you are lucky enough, (cross your fingers), you may end up not needing a short sale if you work this out with your Realtor and you end up breaking even or even slightly ahead.
- Hardship Letter - This says "I can't make my payments anymore, I lost my job, I had to go to the hospital", etc. Plead your case the best you can. There are people still out there with compassion, they may try to work with you.
- Proof of Income & Assets & Bank Statements
- Listing Agreement - When you list with your Realtor they will give you a copy of this. It shows the price the home will be listed for sale and the terms and commission of the sale. FYI Commissions are negotiable when working with a short sale - the bank will negotiate that, not you.
A Short Sale is in no way easy for anyone involved. It is tedious and can take more time than a normal sale. But, it is better than a foreclosure on your credit. You may want to talk to your lender about what they will report on your credit if it sells as a short sale. You can request they not put anything adverse on your report, but the decision is theirs to make unfortunately. Also, ask your Realtor or Lender if your State is a non-recourse or a recourse state. (Thanks Carol!)
So, you have sold your home as a short sale. What happens now? Do you still owe the bank the difference, or will they write it off and forgive the debt - only to put it against you on your credit report? The answer is this....I don't know. That is something that you have to negotiate with your lender. Most of the time they will not come after you for the balance because they have accepted that they are selling it at a price that is less than what is owed. Make sure that your Realtor gets it in writing that they are not going to file a judgement against you for the balance. That is a definite requirement for your peace of mind.
Finally, I just wanted to put this out there. I cannot tell you what the exact qualifications are, or if it's even possible in your particular situation. Talk to your lender about doing a loan modification. This may help you out and help you stay in the home you love so much without having to sell. I personally do not know much about this, but I have worked with an agent who recently helped her clients to NOT lose their homes by getting a loan modification. Talk to your realtor and your lender and see what they can do and if this may be an option for you.
I hope that this helps in whatever situation you may be in right now. If you need assistance in finding a Realtor who specializes in Short Sales, please contact me. I am part of a network of over 150,000 Real Estate Professionals and I am positive I can find you a great Realtor with the expertise you need!
Please follow these links for great information on short sales
Good luck and stay positive! :)