SHORT SALES: SELLER’S EXPECTATIONS

Short Sales: Seller’s Expectations

You might be faced in a difficult position where you can no longer afford your home and the threat of foreclosure is at your doorstep. You might think that there is no way out but there is, you can sell your home by Short Sale.

What is a Short Sale? 

According the National Association of REALTORS (NAR): A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.

What are the benefits?

When selling a home short, allows the homeowner to sell their home as opposed to the bank foreclosing on the property. It’s cheaper for the bank to allow the home to be sold short than it is to sell via foreclosure. However, as the homeowner, you would not be able to receive a profit from the sale.

Although they would not get a profit from the sale, it would not affect their credit as much as a foreclosure would. So if you can sell your home through short sale, its best to try that option.

For both buyers and sellers, the short sale process can be a long, taxing ordeal. However, in the end, it is typically well worth the frustration for both parties. The seller is relieved of significant debt and the buyer gets a real bargain on a new home.

What can a seller expect from a short sale?

Sellers should plan to be involved in the short sale process. Usually, avoiding foreclosure is the seller’s goal, so that they can take out another home loan in the near future. As stated before, a short sale can leave a negative mark on a seller’s credit, but it usually lasts only a couple of years. In some short sale cases, banks will actually report the debt as “paid in full,” so a seller’s credit takes even less of a hit. In contrast, a foreclosure can negatively affect a person’s credit for up to 10 years.

During the short sale process, the property is negotiated with the bank. The reason why the short sale process is long is because the parties are negotiating with the bank as opposed to buyer-seller negotiations. When selling your property short, the agent might use a company such as Significa, to help during the short sale process. To see the Buyer’s expectations of the short sale process, click on the link.

There Are Requirements

Despite the fact that it seems like a win-win for buyers and sellers, if sellers think a short sale sounds like a great way to get out of a debt that they don’t really want to pay, they should think again. Banking institutions require proof that sellers NEED to go through the short sale process. That proof can include being upside down on a mortgage, demonstrating financial hardship and an inability to afford a current payment. Banks may even require a comparative market analysis that shows a person’s home doesn’t have a shot of selling for the amount that they owe. To determine whether you qualify for a short sale, it is best to talk to a REALTOR.

Precautions

If a seller is going through the short sale process but has other outstanding debts, they should be careful about declaring bankruptcy. A bankruptcy filing may diminish their ability to complete the sale if creditors are blocked from collecting mortgage payments along with other debts.

After the Short Sale Closes

Just because a short sale goes through may not mean that a seller’s financial troubles are over. In fact, after the sale, it is possible that a bank can still come after the seller for the difference in the loan balance. Often times, sellers can add a clause to their short sale agreement that prevents banks from doing so, but it may be wise to seek the help of an experienced real estate agent or lawyer to go over the fine print.