Understanding a Short Sale – What is a Short Sale?

What is a Short Sale?

• Selling Your Home for less than it is currently worth. 

When you owe more on your home than it is perceived to be worth, it is likely worth your energy to try to sell your home for it’s current value in an effort to salvage your credit score and rating from foreclosure.  Traditionally, a successful short sale will damage a credit score far less than having your home foreclosed upon.

• Requires Mortgage Lender Approval.

Once a seller has an offer in hand (at a price that is less than what is owed upon their home) requesting the current lender’s approval is required.  Traditionally, this is why short sales take so long to handle.  Lenders processing!

• Successful Short Sale will Negatvely Affect Credit, but, will have less impact than a Foreclosure.

Again, having a successful short sale will assist in limiting credit damage to your credit report.  A hit of 50-100 points on a credit score is likely with a successful short sale.  A hit of 200-300 points is far more likely with a foreclosure on your report.  Furthermore, a successful short sale will likely put you in a position to purchase a home in far less time than a foreclosure. 

• May or may not require that a Homeowner is behind on mortgage payments.

Based upon the seller’s history with the lender, and the lender preferences, it may be likely that a seller can sell their home as a short sale and not have to be behind on mortgage payments.  This will primarily come down to showing a hardship (eg: loss of job, loss of income, divorce) that can justify the need to sell.

If you have further questions, feel free to consult my website: http://www.theshortsalefix.com

 

Understanding a Short Sale – Steps to a Successful Short Sale

#1. Your Home Should Be “Upside Down”

Your home value should be worth less than what is owed upon the home. Can you determine the value in your community?  Consult a Realtor!

 

#2. Speak with your Mortgage Lender!

Every mortgage lender will have options for a homeowner to consider prior to a short sale of the home. Some examples include forbearance or a loan modification. 

 

#3. Determine a Hardship

Whether it be a job loss, loss of income, divorce, etc., understanding a “hardship” to determine why your lender should forgive the debt owed upon your home is critical!

 

#4. Assemble a Short Sale Packet

Before listing your home for sale, speaking to your mortgage lender about the items of paperwork to confirm your position of hardship will be necessary.  Typically, this includes previous tax returns, paystubs, bank statements, and a hardship letter. 

 

#5. List Your Home for Sale

Consulting a Realtor with an SFR designation or a preferable experience in closing short sales becomes important at this point! Listing the home and aggressively dropping the price based upon showings is critical to getting an offer.

 

#6. Get an Accepted Offer on Your Home

Hooray! Offer is accepted and submitted to the motgage lender with your short sale packet. Now, the waiting game begins…

 

#7.  Lender presents Terms of Acceptance

Lender will present a letter of acceptance with terms that will need to be acceptable to the seller and buyer.  Home will likely close 30-60 days after acceptance.

 

Please note, these are general steps to a standard Short Sale.  Each lender has different requirements and these steps present a general outline.  Consult your lender as to their specific requirements.