Short Sales Tips for Sellers
If you're thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won't cover your total mortgage obligation and closing costs, and you don't have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it.
§ Your property is worth less than the total mortgage you owe on it.
§ You have a financial hardship, such as a job loss or major medical bills.
§ You have contacted your lender and it is willing to entertain a short sale.
§ Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).
§ Help you set an appropriate listing price for your home, market the home, and get it sold.
§ Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).
§ Ease the process of working with your lender or lenders.
§ Negotiate the contract with the buyers.
§ Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval. You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.
§ A hardship letter detailing your financial situation and why you need the short sale
§ A copy of the purchase contract and listing agreement
§ Proof of your income and assets
§ Copies of your federal income tax returns for the past two years
§ If you have only one mortgage, the review can take about two months.
§ With a first and second mortgage with the same lender, the review can take about three months.
With two or
more mortgages with different lenders, it can take four months or
When the bank does respond, it can approve the short sale, make a counter offer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)
5. Don't expect a short sale to solve your financial problems. Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:
You may be
asked by your lender to sign a promissory note agreeing to pay back the
amount of your loan not paid off by the short sale. If your financial
hardship is permanent and you can’t pay back the balance, talk with your
real estate attorney about your options.
Any amount of
your mortgage that is forgiven by your lender is typically considered
income, and you may have to pay taxes on that amount. Be sure to consult
your real estate attorney and your accountant to see whether you
§ Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure and bankruptcy.
Short sale requirements change and should be discussed with a financial advisor.