Selling Your Home Short

By
Real Estate Agent with Century 21 Tenace Realty SL3016950

Lately, I've have been approached by many people who ask me for help because they are now upside down in their mortgage. They owe more money than their house is worth and don't know what they can do. The obvious question is what did you do to get in this position?

For some, they just got caught up in the interest only loan rate increases, property tax increase and the recent price drop from the slow market. For others, they bought at the wrong time, took advantage of 100% financing on overvalued properties and others refinanced to pull out equity from their homes and are now stuck.

 Whatever your reason is that you are upside down, there are ways to help your situation such as:

1. Contact your lender to see if they can work out a new payment plan, reduced payments that will allow you to stay in your home until things can get better.

2. Tell them your situation and see if they can refinance your current mortgage (provided you have equity and can afford the new payments).

3. Ask to speak with their loss mitigation department and tell them your hardship situation (loss of job, medical problems, payments have doubled due to insurance/taxes etc. ) and ask them if they will work with you on a short sale. Sometimes they will work with you without being behind on payments, other times they will require you to be a few months behind before they will even speak with you. Ask them!

4. If you are nervous about speaking with the bank, contact a realtor who is familiar with the short sale process to have them negotiate on your behalf. It will cost you nothing to at least get the advice. A good realtor will be able to negotiate for you, list and sell your home and find you a new place to live.

5. The worst thing you can do is nothing. Foreclosure is the worst option. it's better to have a few late payments on your credit than a foreclosure that can stay on your credit for 7-10 years.

My advice is to contact someone who is experienced and can help. With millions of people facing foreclosure this year, you are not alone. Banks are overwhelmed with people in this same exact situation. They don't want your home, they want their money so that they can lend more of it to other consumers. The more BAD DEBT they have, the less MONEY they can borrow from the federal government and in turn the less money they can earn in interest.

Hope this helps you if you are in trouble.

 

JP

Comments (5)

Paul Kaplan
The Paul Kaplan Group, Inc - Palm Springs, CA
Mid Century/Modern homes in Palm Springs - www.Pau
Do you know how a Short Sale will affect a person's credit?
Aug 13, 2007 03:33 AM
Nicole Kraus
Signature Realty Associates - Dover, FL
That is some great advice and am going to print this blog out for future use.  Thanks!!!
Aug 13, 2007 03:51 AM
Richard Thewissen
ERA Realty Pros - Stonington, CT
Good information. Thank You for posting it.
Aug 13, 2007 03:55 AM
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos
Hi John,  Good post.  Saw a list of the reasons why some people don't speak with the bank whenthe loan is in trouble and it really opened my eyes.
Aug 13, 2007 03:55 AM
John Paul Sansaricq
Century 21 Tenace Realty - Boynton Beach, FL

How a short sale affects someones credit is really decided by the lending institute that they are dealing with. In general, the bank wants you to be in a hardship situation before they even talk to you. If you are current with your mortgage payments the bank doesn't think there is a problem. If you call the bank and ask them to do a short sale chances are they will not work with you. But if you are 3 months or more behind they are more likely to work with you because of the fact they have not received any money from you and can visibly see signs of a hardship.

Being 3 months or more behind will definitely show up on your credit report as late 90, 60, 30 days. When the home does sell, it will show (most of the time) that the loan was satisfied for an amount less than what was owed. Again each bank has their policies on what they do. And depending if the loan was in 1st or 2nd position will affect the outcome.

A home equity loan might not be as easy to forgive the debt as the first mortgage is, due to the fact they stand to loose most if not all the money that was lent. By all means you need to call the bank and ask them how they handle the loan and your credit once the place goes through a short sale.

There are many factors that come into play. Is there any equity in the property? How much will the bank walk away with? What is the home actually worth?

These are reasons you need to be working with someone who has experience in doing short sales that canguide you.

 JP

Aug 13, 2007 06:40 AM