A Short Sale occurs when a Bank (mortgage holder) is willing to accept less than the amount owed to allow the sale of a property. Many distressed homeowners believe that because they are having problems and they owe more on the property than it is worth, that all they can do is let the Bank foreclose...Not true! Though most homeowners are not facing the fear of losing their home, I doubt that there are many of us that don't know a friend, family member or co-worker facing the challenge of keeping their home in this declining real estate market.
Here are some common seller questions and answers:
Is this option right for me?
Mortgage lenders are increasingly willing to work with borrowers faced with a financial hardship. If you are faced with a hardship and are unable to meet your obligation on your mortgage, your lender would prefer to settle the matter with you as opposed to taking the property through foreclosure. As you consider the option of pursuing a Short Sale, remember your lender is looking to minimize the potential loss on your loan. By agreeing your lender has arrived at a solution that is "financially" better for them than foreclosure.
If I do a Short Sale, how much will I have to pay to sell my home?
Possibly nothing. When your lender approves the Short Sale, all commissions, title and escrow fees and even most repair expenses are normally paid by the lender as part of the Short Sale approval. Remember, lenders approve Short Sales and accept the resulting loss in an effort to avoid bigger losses through foreclosure.
What about my credit?
The big key here is to avoid foreclosure. By nearly any measure, a foreclosure is one of the most damaging credit events you can encounter.
What paperwork will I need to provide to the lender?
Much of the necessary paperwork will look like what you provided to qualify for the loan, including detailed income, asset and hardship information. Other supporting documentation should be supplied by your real estate professional. The importance of properly handling this step is critical, not only to being approved, but also how quickly. Simple mistakes and omissions can easily turn a 60 day process into a 4 or 5 month ordeal and often the loss of a buyer.
Done correctly, a Short Sale is a win-win situation for both seller and lender