What is a short sale? A short sale is a sale of real estate where the proceeds of the sale are not sufficient to satisfy all liens against the property.
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Not anyone can short sell their home. You may be eligible for a traditional short sale if:
- You’re experiencing a financial hardship, such as reduced income, medical expenses, or divorce
- You owe more on the property than it’s worth
- You’re unable to afford your current monthly mortgage payment
- You’re unable to modify your current home loan
- You’ve received an offer on the property
Simple, right? Not so fast. Short sales take time and effort. The right Agent will guide you through this process, explaining what is happening every step of the way and, if all goes well, sell your home.
Short Sale Misconceptions
Following are six common misconceptions about short sales and the short sale process.
1. I cannot short sell my home because I’ve already gotten a notice of intent to foreclose.
Just because you’ve received a notice of intent to foreclose, it does not mean you’ve passed the point where a short sale is an option. Time is of the essence, however. The sooner you realize that a short sale is your only option to foreclosure, you should contact a Realtor to discuss it. Here is a link to more preforeclosure information.
2. A short sale will cost me too much money.
A short sale should not cost you any money. Do not pay anyone an upfront fee to help you short sell your home. You should speak with a Realtor. They will help you through the process and their fee is paid by the bank. There are some potential costs you could incur. If the bank will not release you from a deficiency balance in the short sale, you will be liable. The bank will also report the deficiency as income to the IRS. It would benefit you to consult a tax professional to get more information on the potential ramifications to your credit and your potential tax liability.
3. Banks do not like short sales because they lose money.
In many cases, banks actually prefer a short sale. Short sales allow them to avoid the high costs of foreclosure, which can be much higher than a short sale. Short sales can be time consuming, but a foreclosure can take up to 18 months and cost the bank in time, maintaining the vacant home and remarketing the property. After the foreclosure process, banks are not always left with a property that is in prime condition, ready to be sold.
4. The short sale process is too difficult and time consuming.
Short sales can be difficult to manage. Not all banks possess the staff to handle the volume of short sale requests they are getting. This is where patience and determination can pay off. Short sales are often denied because of understanding of the process. The right Agent will be able to manage the information you provide and put that information in front of the decision maker at your lienholder(s).
5. I’ve tried a loan modification and was denied, so I won’t be granted a short sale.
Loan modifications and short sales are handled by different departments at the bank. The requirements for a loan modification are not the same as a short sale. Often, the loan cannot be modified to the point required because the homeowner’s income is too low. Your chances of qualifying for a short sale are better because you’re asking the bank to accept less than the lien, they are not relying on your on-going ability to pay.
6. A short sale will preclude me from being able to purchase another home.
Yes, a short sale will damage your credit. However, there are some banks that will finance 18-24 months after a short sale. A foreclosure will stay on your credit report for seven years.
Things to Remember
I hope I’ve shed some light on the short sale process for you. Remember, do your homework and don’t delay! Now, more than ever, choosing the right Agent to guide you through this process is very important.