Best Way to Short Sale Your Home
The short sale phase can sound overwhelming, but having a grasp on the steps will make it a lot less spooky — and help home buyers manage a tough financial circumstance without too much harm. Short sale — where homeowners sell their homes for less than they owe on their mortgage — seems to be the last resort for people who can’t afford their mortgage and face foreclosure. So how does the short sale process work? Read below to find the short sale process.
1. Consider Loan Modification First
Before you decide that you ought to have a short sale, speak to your lender or housing advisor regarding your case. You can be allowed to make adjustments to the loan to avoid having to sell your house: the Federal Home Affordable Modification Program, a program administered by the United States. The Department of Housing and Urban Planning can be an alternative. When you qualify for HAMP, the mortgage provider is likely to place you on a three-month probation schedule, allowing you the flexibility to prove that you will make regular payments at a new monthly payment point. If you’re going through the trial, you can have a fresh mortgage payment to stop moving forward with a short sale.
It’s best if you first try to go for loan modification and see if it’s possible. Don’t take the plunge without exhausting other options. The only way you should be going for a short sale is when you exhaust all your options, and you have the risk of facing foreclosure.
2. Talk to Your Lender About a Short Sale
Since short sale implies that you’re offering to sell your house for less than you owe on your mortgage, your lender’s going to have to sign off. So now, the lender may provide evidence that they are authorizing the short sale. The sellers will send a short sale package, which contains hardship documents. Hardship documents inform the bank that the seller is genuinely going through financial difficulties.
These documents may include bank statements and account information, salary reports like pay stubs, copies of bills and various expenditures, reports of properties, and much more.
3. Contact a Real Estate Agent
Now you’re going to need a realtor to sell your property — and because short sales are complicated, you’re going to want an agent with expertise in the short sale market to negotiate the deal. Ensure that you look for those who have expertise and experience in the short sale deals. Keep an eye out on someone who has been a Certified Distressed Property Expert, which indicates that the person has done practice on short sales and foreclosures. Once you find them, the agent can then evaluate your financial condition, as well as the approximate valuation of your house, for a listing price.
While you still might think that you can sell the home on your own, know that the realtor knows the market best, and they have exceptional negotiation skills that can help you in getting a better deal. Look for nothing short of an experienced and skilled real estate agent.
4. List Your Property
That is one step in the short sale phase that is like every other sale of the property — the home in question is listed by the realtor, who must try to locate the buyer and make them sign the deal.
If you receive an offer from the buyer, you will have to forward it to the lender for approval. Further talks may be expected between your agent, the buyer’s agent, and the lender before you agree.
If your lender agrees to the short sale deal as per the U.S. Treasury Home Affordable Foreclosure Alternatives program, you will be able to short sell your house within four more months or less. If you haven’t applied for HAFA, then the procedure can take longer. That is why you must ensure that you are qualified with HAFA.
5. Close the Deal
If your lender approves your buyer, all is good. You move out. The buyer moves in. The funds used to purchase the house will go to your lender, and your mortgage debt will be forgiven. If you qualified for HAFA, you would also walk away with $3,000 in moving expenses. If you didn’t, you simply walk away without that mortgage debt on your shoulders.
After a short sale, how long before I can buy a new home?
We know that there are consequences of selling the house in a short sale. The IRS would view the unpaid mortgage debt as taxable income, and you may end up owing income taxes. Moreover, your credit score might take a hit, since you’re not paying the full debt you promised to pay when you took out the mortgage loan. Short sales, though, do have several benefits. Not only do they get the seller out of the pressure of foreclosure and out of debt, but they will also encourage you to remain in your home throughout the sales process.
Usually, you can qualify for a traditional loan within four years of a short sale. It might be a long time, but it’s much safer than foreclosure, where lenders tend to demand you to wait seven years. Short sale looks better in the view of the bank than a foreclosure. The bank recognizes that you have come to them with your inability to pay, rather than only leaving your house.