Is a Short Sale Right For You?
If you are experiencing a financial hardship such as a job loss or adjustment in adjusting mortgage, a bad tenant in a rental property, or divorce that forces you to sell your home in a down market. When doing a short sale, lenders are interested in how much you owe, and how much you can sell for. If you are a homeowner facing foreclosure due to non-payment, or you are not delinquent but need to sell at a loss, there are sevreal options that you need to consider:
Options:
- Deed in Lieu – This option involves the seller calling the lender and saying “I’m done…here are the keys”. The bank may or may not even accept this option, and they will require paperwork to be filled out.
- Forbearance – If you are behind $5,000 in interest, the lender will give the borrower a payment plan to pay back the delinquency, on top of the regular mortgage payment.
- Bankruptcy – Bankruptcy may not protect the home. Check with your attorney.
- Short Sale – The lender will accept a payoff that is less than what is owed on the mortgage. A lender may choose the option if they believe that the property may go into foreclosure due to the seller’s hardship. A lender cannot make someone pay the mortgage, and the foreclosure will end up costing a lender far more money in the long run.
If you are ready for a short sale, contact the lender and ask for their “home retention” or “loss mitigation” departments and tell them you are considering a short sale. You’ll need to request the necessary short sale paperwork, which will consist of an application, personal financial statement, and they will ask you to provide current bank statements, tax returns, a hardship letter and pay stubs. In the hardship letter, simply explain why you need to sell or why you can no longer afford the mortgage payments. Make it short, sweet and honest. Submit the document package to the lender. Some lenders will take 30 days or even longer to acknowledge that they have received the package. Once the offer is approved, you will receive a release of lien.
The selling price is not the net price. You need to think about the seller closing costs, real estate taxes, liens and commissions. The costs may come from the sales proceeds, so the lender will net less than the selling price.