Short Sale Considerations and Your Home
Homeowner may have two short sale options.
Millions of American homeowners are under water, owing more on their mortgages than what their homes are worth. If you are in a positive financial position where you can hold onto your home, then you may be able to ride out this present crisis. Home prices may not have hit bottom, but when they do, a gradual rebound is likely. Perhaps in three to five years your home’s value will increase to where your home is no longer under water with some equity built up.
For other homeowners, getting out from underneath a burdensome mortgage is an option. Foreclosure is the most extreme option, a move that will wreck your credit and keep you from buying a new home for several years. One alternative is a short sale where a buyer makes an offer for your home for less than what you owe on the mortgage, with the bank accepting the offer and allowing you to avoid foreclosure. With a short sale your credit will still take a hit, especially if you’re currently late with your payments. Still, a short sale can be better than a foreclosure, providing a temporary financial setback, but one that can allow you to recover faster.
Short Sale Options
If you’re considering the short sale route, there are two paths that you can take. Read on and we’ll cover what your options are and how you can short sale your home and move on.
1. An in-house program — A in-house short sale is a program that allows you to sell your home in a short sale and avoid foreclosure. Such programs vary from lender to lender, but are typically aimed toward helping homeowners that are not qualified for the federal home loan assistance program. Typically, such homeowners don’t have the financial resources to continue owning their homes and need to sell it. To be eligible, you must meet several requirements:
- You owe more on your home than what it is worth.
- You are experiencing a financial hardship such as a loss of a job, a divorce or an illness and simply can no longer afford your home.
- This property must be your current residence and can not have been left vacant or rented out for more than the past 12 months. Moreover, you did not buy another home during this time.
- You took out your mortgage several years ago. Some lenders, such as Bank of America, peg that date as January 1, 2009 or earlier.
If you are considering a short sale, then contact your lender for guidance.
2. Traditional Short Sale — A traditional short sale is where you’ve already marketed your home and have received an offer. In this situation, you’ll need to contact your mortgage lender and present a copy of the offer and explain your financial hardship. You should be working with a licensed real estate agent who will work with your lender on your behalf.
Your bank is not required to accept a short sale offer, something the interested buyer should know. A short sale offer can take weeks or even months for a decision to be made by the bank, which must approve the offer. Your chances of a short sale going through can increase if there are no other buyers and the offer is a strong one with the bank facing only a small loss.
Local housing market considerations can impact whether your short sale has a chance to succeed. In a market that is trending down, your bank may look at any reasonable offer favorably. In a market that is beginning to rebound, your lender may hold off making a decision, especially if other offers are possible. Working with a real estate agent who is familiar with the short sale process can prove beneficial, a professional who can manage expectations and work closely with your lender to help make your short sale dreams a reality.