All About a “Short Sale”
Sometimes a homeowner may find themselves in the position of not being able to make their mortgage payments through circumstances beyond their control - such as a major illness that leaves them unable to work, a layoff from their job, or divorce. A deline in the housing market may leave the walue of the home way below what is owed on the mortgage.
In a case such as this, the homeowner may want to explore what is termed a "short sell" rather than lose the house through foreclosure which can ruin their credit.
A short sell is basically selling the home for less than is what is owed. However, there are a lot of variables that should be worked through with the help of a real estate professional.
A buyer must be found who is willing to purchase the home at market value, the costs associated with the sale must be accurately figured, then the mortgage company should be approached with the offer. This is where the real estate agent can assist the homeowner.
The mortgage company may accept less than what is owed on the mortgage if they see the short sell will help them recover more money than foreclosing on the house and selling it at auction. However, the seller may still be held liable for the difference if the mortgage company decides to play hard ball. Again, the real estate professional can be of great assistance to the homeowner.
In any event, it is wise for the homeowner to contact a real estate agent to discuss their options when they find themselves unable to make their mortgage payments. The agent can explain how to avoid foreclosure through a short sell.
Who Benefits from the “Short Sale”
In a short sell, the seller:
Will be able to stay in the home until it sells
Will have no outstanding balance
Bankruptcy may be avoided
No foreclosure damaging their credit record
Fewer worries
By accepting a short sell the lender:
Will receive their proceeds withing 24 hours of the closing
Will receive more money than from a Sherrif's sale
May receive a tax break for forgiving the debt
The Purchaser or Investor
Ø 10-15 in equity
Ø Functional Property
Ø Very Little Competition
Ø Possible Seller Buy back/No Rehab
Ø Purchaser Could Owner Occupy
What qualifies a homeowner for a Short Sale?
o Behind on Payments
o Little or no equity
o Legitimate hardship
Should I move out of my home?
ABSOLUTELY NOT! FHA and VA will not do a short sale on a Vacant home. They consider this abandonment.
What will this cost the Seller?
NOTHING! The lender will pay me out of the proceeds of the sale.