Do you owe more on your home than it’s worth?
YOU ARE NOT ALONE.
If you are considering selling your home, but you owe more than it’s worth in today’s market, you are not alone and may qualify for a short sale. Nationwide, there were 500,000 short sales in 2009. That means approximately one in every ten sales was a short sale. A short sale typically occurs when the home’s sale price is insufficient to pay off the total mortgages, closing costs and any other lien balances owed on the home.
While the decision to sell short may be difficult, the process doesn’t have to be. We can help.
Perhaps you have heard stories about the challenges of selling a short sale. Don’t be discouraged. While it is true that a short sale may take longer than a traditional home sale because it requires lender(s) to approve the purchase agreement, banks are constantly working on ways to improve the short sale process. The federal government is also working to improve the short sale selling process. The Home Affordable Foreclosure Alternative Program (HAFA) provides lenders, mortgage investors and mortgage servicers more incentives to offer troubled borrowers short sales or deed-in-lieu (DIL) to avoid foreclosure.
With City Trends Realty our agents have the expertise to guide you through this oftentimes complex transaction. We can help you determine whether you might qualify for a short sale and protect your interests as a seller.
Every lender has different standards that sellers must meet in order to qualify for a short sale.
You will likely need to meet the following criteria:
- You are experiencing a financial hardship
- You owe more on the mortgage than your home is worth
- Your mortgage is in or near default status
- You do not have a source of assets to pay the difference between the sales price of the home and your remaining mortgage balance
If you are considering selling a short sale home, here are some tips provided by REALTOR® Magazine:
- Contact your lender. Know all of your options before deciding a short sale is right for you. Contact your lender to see if they have any programs to help you stay in your home. They may be willing to modify your loan terms. This could result in more affordable monthly payments by refinancing your loan at a lower interest rate, switching your loan from an adjustable-rate to a fixed-rate mortgage, or providing a payment plan to get your loan current. There are also non-profit organizations available for consultation about alternatives.
- Hire an experienced City Trends Realty agent. It has only been in recent years that short sales have become a fairly common occurrence, so it’s important to have a REALTOR® and real estate attorney representing you who are experienced in selling short sales. A City Trends Realty agent with working knowledge of short sales can ease the process of working with your lender(s) by helping put together the documentation that the lender needs to approve before the sale of your home can take place.
- Gather appropriate documentation. A lender/creditor will require disclosure of personal assets along with certain documents to determine whether you qualify to sell a short sale home. These documents typically include: a letter detailing your financial situation and why you need a short sale, a copy of the purchase contract and listing agreement, proof of your income and assets, and copies of your federal income tax returns for the past two years. Because lender approval is required in order for a short sale to take place, they will ultimately be the one who qualifies you for a short sale, not your real estate agent.
- Be patient. Even with bank programs that have been streamlining and accelerating the process, it will take some time for your lender(s) to approve the short sale and okay the purchase agreement. If you have two or more mortgages, especially if they are with multiple lenders, it’s likely that the approval process will take longer because approval is required from all lenders. When the bank(s) respond, they can approve the short sale, make a counter offer or deny the short sale. A counter offer or denial of the short sale can lengthen the approval process or force you to start over. The approval of a short sale is never guaranteed.
- A short sale won’t solve your financial problems. If your lender(s) approve the short sale, your financial problems won’t be solved. Your credit score will be impacted as a result of a short sale transaction and you may be asked by your lender to pay back the difference between the sales price of the home and the remaining loan balance. If the lender forgives any amount of the loan, it is generally considered income on which you may have to pay taxes. The Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act of 2007 allows homeowners to exclude debt forgiveness from income on federal tax for loans discharged in 2007 – 2012. Be sure to consult your real estate attorney and your accountant to see if you qualify.
If you or someone you know owes more on their home than it’s worth, contact us to gain perspective on the short sale selling process. We will help you explore all of your options so that you can feel confident in the decision you make, whatever that may be. Call or e-mail us today for a no cost, confidential consultation. City Trends Realty agents are experienced and trusted partners and we are here to help.
Get in touch with a City Trends Realty agent for your short sale transaction.