Top Things to Know About a Short Sale

If you're facing financial troubles with your home, it may be a result of something unavoidable such as your adjustable-rate mortgage (ARM) rising, unforeseen job loss, a death in the family, etc. lf your house is worth less than your mortgage but you need to sell, there is one option that can rescue your credit and help you avoid bankruptcy. A real estate short sale is here to save you!

What is a 'Real Estate Short Sale?'

A real estate short sale, also known as a pre-foreclosure sale, is when you sell your home for less than the balance remaining on your mortgage. If your mortgage company agrees to a short sale, you can sell your home and pay off all (or a portion of) your mortgage balance with the proceeds.The lender either forgives the difference or gets a deficiency judgment against the borrower requiring you to pay the lender all or part of the difference between the sale price and the original value of the mortgage. In some states, this difference must legally be forgiven in a short sale.

A real estate short sale occurs when a lender and borrower decide that selling a piece of property, thereby absorbing a moderate loss, is preferable to having the borrower default on the loan. It is therefore an alternative to foreclosure, and it helps a borrower avoid having a foreclosure appear on his credit report.

short sale is an alternative to foreclosure and may be an option if:

-          You are ineligible to refinance or modify your mortgage

-          You are facing a long-term hardship

-          You are behind on your mortgage payments

-          You owe more on your home than it’s worth

-          You have not been able to sell your home at a price that covers what you still owe on your mortgage

-          You can no longer afford your home and are ready or need to leave

-          If there are other circumstances that prevent you from keeping your home, such as relocating for a job


What are the benefits of a short sale?

-          Eliminate or reduce your mortgage debt

-          Avoid the negative impact of foreclosure

-          May be eligible for up to $3k in relocation assistance in some cases

-          Start repairing your credit sooner than if you went through a foreclosure

-          Sellers who choose to list their property in a short sale are normally in financial distress and need a way to sell property prior to foreclosure.

-          You may be eligible to receive relocation assistance to use toward your moving expenses and to make the transition to new housing easier.

What is the process for a short sale?

If you qualify for this option, the process is similar to a normal real estate sales transaction. You will work with a real estate agent to market and sell your home.

However, your mortgage company will also be working with you and your real estate agent every step of the way to set the sale price, collect financial information and negotiate with other lien holders review acceptable offers,agree to the terms of the sale once a buyer is in place, and work with the buyer’s real estate agent and mortgage lender to finalize the sale.

*Note: A short sale may take up to 120 days, but this could be shorter or longer depending upon your specific situation.

Be prepared to do a lot of work to complete a short sale, as completing a short sale is labor-intensive. However, the payoff for the extra work involved in ashort sale may be worth it.

Step 1

Gather all of the documents you'll need to prove your financial hardship to the lender. These may include bank statements, medical bills, pay stubs, a termination notice from your former job or a divorce decree. It is up to you to come up with the short sale proposal. Be aware that the lender ultimately must approve a short sale after receiving all the details because the lender is the recipient of the proceeds. Your job is to find a buyer for your home.

Step 2

Be ready to outline your current hardship and explain why you are having trouble making your mortgage payment, the reasons why this is a long-term problem and inform your mortgage company that you want to sell your home to avoid foreclosure. Your mortgage company will need to understand the reasons why you are having difficulty in order to find the right solution for you.

Step 3

Contact your mortgage company. Tell them you are interested in a short saleand you want to see if you qualify.

Step 4

Contact the professionals. Consult an attorney, a tax professional, and a real estate agent. If you think that the last thing you can afford is to pay for these high-priced professional services, you may find yourself in even bigger financial trouble if you make a mistake by trying to handle a complex short saletransaction yourself.

Professionals accustomed to dealing with short sale transactions will be able to give you guidance on how to pay them.Perhaps you can also pay their service fees out of the sale proceeds from your home.

Take a look at 8 Easy-to-Follow Steps to Sell Your Home to help you sell your home faster.

If you’re about to face foreclosure or you can no longer afford to pay for your home, take time to investigate listing your home as a short sale. List your home with the right agent from a local.

There are many different reasons why people decide to sell their home. Check out these top reasons to help you decide whether or not to sell your home is a viable option for you.

At DSEAYCOM, we’re happy to answer any questions you have about buying and selling in the Alabama area. Call us now or feel free to share our contact information with someone you know that needs expert help buying or selling their home.

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Derrick Seay
Derrick Seay
DSEAYCOM B'ham Branch