If you are 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 the amount you owe on your mortgage (or mortgages). A short sale is not a foreclosure. In a foreclosure the lender takes title (or ownership) of your home through a legal process and then sells it. In a short sale you remain the owner of the property until it is sold.
Here are six things you should consider before pursuing a short sale.
- Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale you should consider calling your lender to see if they will modify your mortgage and make it more feasible for you to remain in your home.
- If a loan modification is not an option you may want to consider a short sale if :
- Your home is worth less than the total mortgage owed
- You have a financial hardship such as a job loss, divorce or medical bills.
- You have spoken with your lender and they have agreed to consider a short sale
- Hire a qualified real estate professional – you will want to work with a real estate professional who can demonstrate a thorough working knowledge of the short-sale process and won’t try to take advantage of your situation or pressure you to do something that isn’t in your best interest. Look for agents who have taken professional short sale training such as CDPE – Certified Distressed Property Expert.
- Begin gathering documentation before any offers come in. Your lender will provide you with a list of documents that they will require prior to approving your short sale. Work with your real estate agent to gather this information and provide it to the bank BEFORE you get a contract. This will help speed up the approval process and keep the Buyer from loosing patience and walking away from the contract.
- Prepare buyers for a lengthly waiting period. Even though you submit the paperwork ahead of time, it can still take more time than a typical transaction to close the property. Some experts say that if you have only one mortgage, the review can take up to two months. If you have more than one mortage (i.e. an equity line) the review can take three months. If there are different lenders involved it may take four or more months.
- Don’t expect a short sale to solve your financial problems. Here are some things to consider before moving forward on a short sale:
- You may be asked to sign a promissory note stating that you agree to pay back the amount of the loan you were “short”.
- Any amount of your loan that is “forgiven” may be considered income and must be reported on your income taxes. Contact a Certified Public Accountant for more details.
- Completing a short sale may have an adverse impact on your credit score. However, a short sale does not have as an adverse impact as a bankruptsy or foreclosure.
As a Certified Distressed Property Expert, Connie Carlson has the experience and training to help you decide if a short sale is right for you. She will give you honest feedback and share with you other options as well. Call Connie today at 678-631-1812 or email her at Connie@LivingInCobb.com for a FREE – CONFIDENTIAL consulatioon.
