Short Sale
What Happens if I Choose Short Sale?
The purpose of a short sale is to sell the property for a lesser amount than what is owed on it at an agreed-upon amount between the debtor and the lender. The entirety of the funds from the sale will go to the lender as payment-in-full for the outstanding debt.
Determine Your Eligibility
Some things you need to consider before choosing to undergo a short sale include any significant financial hardships such as being recently laid off from your job or acquiring a large amount of medical expenses. The equity of your home must also be lower than the outstanding balance on the mortgage.
You will have to collaborate with your lender and come to an agreement on how to proceed with the short sale. A lot of lenders will require you to have already listed the property or have an offer from a buyer.
Much like Chapter 13 Bankruptcy and a Deep-in-Lieu of Foreclosure, you’ll want to exhaust your alternatives before going down this road and make sure there is no other option for you as a Short Sale will have a lasting and negative impact on your credit.
The Short Sale Process
If you owe payments to multiple lien holders (i.e., second mortgages or liens), you will need to reach out to them to get approval before proceeding.
Hire a Specialist
Think about working with a real estate agent experienced in working with short sales. They can guide you through the process, help with property appraisal, and assist in negotiations. They’ll also help you list the home for sale while making sure to follow the requirements put in place by your lender.
Submit Package
With the help of your agent, assemble and submit a package to your lender containing the necessary documents including the offer to buy from the purchaser. Your lender will go over the package and decide whether to approve it or not. This process can take some time so remember to be patient.
Negotiations
Your lender will then begin to negotiate the terms of the short sale with you. This will include the price of the sale and what will be done to satisfy the remaining debt. Some lenders will choose to forgive the debtor’s remaining balance. Many others are much less forgiving and may require a plan for repayment.
Closing the Sale
Upon lender approval, you can officially close the sale with the house buyer. Don’t get attached to the profits because every last bit will go directly to the lender to satisfy the terms agreed upon. You might also be required to pay back the remaining debt, as mentioned before, with a repayment plan.