Short sale is a huge buzz word going around the real estate industry right now. It’s actually been buzzing around for the last 3 or 4 years. This means that chances are good that you’ve heard the words “short sale”, but do you understand what a short sale is, and if you’re in a foreclosure situation how it can help you?
Let’s get started with what the terms short sale mean in the real estate world today. A short sale simply means that the bank (or mortgage holder) is willing to accept less for the sale of your property than is actually owed. For example if you owe $400,000 on your house and the bank will allow you to sell it for $350,000 (or anything less than $400,000) then it’s considered a short sale.
A short sale can be a great way to give you a fresh start. It can alleviate the stresses of having a mortgage payment that you can’t pay and let you start over. Most people are scared that a short sale will ruin their credit, but there are short sale lending programs that will allow you to buy another house in 1-3 years (and sometimes sooner).
If you’re in a potential foreclosure situation this probably sounds pretty good, but let’s talk about the whole picture.
In most cases the bank is going to want a reason for allowing you to do a short sale on your house. Meaning they want to see that you can’t make your mortgage payments because you lost your job, or you got sick, or you were divorced, etc. This means that one of the first things that you’re going to do is prove to the bank that you can’t afford to continue paying for your house. You’ll have to write a hardship letter, and gather supporting documentation to prove your hardship.
Now that you’ve proved to the bank that you can’t afford to make your mortgage payments, and that you can’t sell your house for what is owed they will most likely approve you for a short sale. The next issue is the deficiency or the difference between the actual sale price of your house and how much is owed on the mortgage (total payoff). If the bank doesn’t wave your deficiency they can come after you for up to 26 years to collect that difference. Most times the bank will not wave your deficiency if they think you’ll be able to make a significant amount of money in the future, or if you have other assets that they might be able to collect the money from. You best attempt to avoid the deficiency is to have a good short sale negotiator working on your side. You can usually find these people as good short sale specialist realtors, or investors that handle a large number of short sales regularly.
If you’re saying to yourself “dang! I need a short sale!” then your best choices are to find yourself a great realtor that actually knows what they’re doing (this is possible, but can be hard), or find an investor that knows what they’re doing (you can usually tell just by asking a few simple questions).
A short sale is a great way to give yourself a fresh start, and you should never feel like you’re the only one that needs a short sale. The majority of the houses being sold today are short sales, and the truth is it’s probably the banks fault that you’re in this situation anyway. So, if you think you’re in need of a short sale don’t hesitate to ask for assistance.
If you have any questions feel free to email me at [email protected]