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Do you need to short sell your home?
Not sure what a short sale is? A short sale is when the amount of all outstanding loans are greater than the amount for which the home could sell. This situation is usually the result of home values in a market rapidly deflating.
For many homeowners, a short sale is an ideal way to prevent foreclosure or bankruptcy when they can get the lender to forgive the difference.
Under current guidelines, with a short sale the seller is able to qualify for a government secured loan with a good interest rate 2 years after the closing of the short sale. The waiting period after a foreclosure or bankruptcy may be as long as 5 years.
What's involved in a short sale?
First, meet with a knowledgeable REALTOR®, like those at American Dream Financial and Real Estate, to go over your financial hardship and to determine the likelihood of getting a short sale approval from your lender.
Second, after you have been pre-qualified for a short sale it's time to talk about the costs of selling your home and who is responsible for these expenses. Typical real estate transaction costs are: title report, escrow fees, disclosure reports, inspections, property taxes and agent commissions.
Our goal at American Dream is to negotiate a short sale approval where the lender/bank pays all the fees associated with the sale. We are very successful at ensuring that the seller is not the one paying these fees.
Third, next we discuss the possible outcomes for the sale of your home based on your specific situation. For example: If there are 2 mortgages on your home, the 1st mortgage holder may accept to release you from further liability after the conclusion of the sale and may even contribute part of the proceeds from the sale to pay the 2nd mortgage holder so they also agree to release their lien and release you from further liability as well.
Using this scenario, let's say that your home is worth $225,000 but your mortgage balance with the 1st is $295,000 and the balance with the 2nd is $60,000. You receive an offer for $215,000 which is approved by the 1st mortgage. The 1st mortgage will contribute $3,000 to pay the 2nd mortgage so they release the lien so the sale can proceed. IF the 2nd mortgage accepts this amount, then at the close of the transaction both the 1st and 2nd mortgages are considered to be paid or "Settled for less than the full amount". You have not been asked to contribute any funds of your own to complete the transaction. This is the very best possible outcome of a short sale.
Many junior lien holders (2nd or 3rd mortgages) may ask for an additional contribution from the seller/borrower and additional negotiation may take place at this time. All short sales don't have the same outcome. In some cases, the borrower may have to contribute some funds in order to satisfy the lender requests for a settlement.
* There may be tax consequences related to the forgiveness of debt achieved in a short sale. We strongly advise you to contact your Accountant or Attorney to determine if you would incur a future tax liability. We are not able to provide you advice regarding this topic.
Fourth, next we figure out the true market value of your house. A knowledgeable REALTOR®, like those at American Dream, will be able to give you a reasonable idea of what your house should possibly sell for based on prior sales of similar houses in the neighborhood. Beware of websites where a computer estimates your home's market value since they may not have complete information or know important things like neighborhood trends and current listings.
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When you're ready to get started, contact me through my site or e-mail me. I'm happy to answer questions you have regarding real estate short sales. |
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Fifth, once you understand the likelihood of being approved for a short sale; the expenses associated with a short sale and who will pay for them; the possibility that one or more lenders will require a cash contribution from you; the possible tax consequences of a short sale and the market value of your home, it is time to sign the listing agreement which will provide the terms under which your home will be sold.
Next, once the appropriate paperwork is completed, we will contact your lender and let them know of your situation and we will inform them that we are representing you in the sale of your home. We will confirm with the lender all the steps required to negotiate a short sale with them and will obtain a detailed list of the documents that need to be included in the short sale request package.
Finally, your lender or lenders will have to approve the final sale. If there are two lenders and only one approves the sale, we cannot move forward until we obtain approval from the other lender as well.
We understand that each case is different and welcome the opportunity to work with you and answer any questions you may have regarding your specific situation.
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