What is a short sale?
A short sale is when the mortgage company accepts a payoff on the sale of your house for LESS than the amount you owe on the house. For example, pretend you bought your house for $220,000 and owe $220,000. And you have now run into a financial hardship and cannot make the mortgage payment. Worse yet, now your house is only worth $175,000. There is no way you can sell it through traditional methods, so the bank may agree to take a payoff of $175,000 (or less) minus commissions and fees associated with the sale.
Why would a mortgage company agree to a short sale?
It saves them money when compared to the costs of foreclosing. The process of foreclosure is expensive and usually ends up with the bank owning the house. Once the bank owns it, there are no payments coming in on the house, and the bank is responsible for all the costs of holding a vacant house while agents try to sell it. Eventually it sells, usually after many price reductions, and agent commissions. When all the numbers are added up, banks are typically better off taking a short sale and getting their money NOW rather than getting the same or less money in 6 to 12 months once the house finally sells.
Who qualifies for a short sale?
Each lender may require different things, but all lenders require a financial hardship that will likely result in foreclosure if a short sale is not pursued and a no-equity situation on your house. Some examples of financial hardship include job loss, divorce, medical expenses, etc. If you are not able to make your mortgage payments and the hardship situation is not just a 30 day hardship, you are probably a good candidate for a short sale.
If on the other hand, you have $25,000 in your checking account, and are on time with your payments, you are NOT a candidate for a short sale. Also, if your house is worth a lot more than you owe, you are not a candidate for a short sale.
What are the advantages of a short sale?
You avoid the damage on your credit report that a foreclosure will cause. Often you can remain in the house for an extra few months and you get to walk away from the house knowing you sold it and did not get foreclosed on.
What are the disadvantages of a short sale?
The main disadvantage to a short sale is that MOST mortgage companies move slow. The entire process usually takes 3 to 4 months. This is also an advantage if you are getting back on your feet and need a place to stay, because while the short sale is being worked you can stay in the property. The other disadvantage is that ultimately the short sale may not be accepted by the bank, in which case the bank moves forward with the foreclosure process.
When should I begin the short sale process?
Time is of the essence. Call us today to discuss your situation! Call 757-737-2829. If you are behind on your mortgage, the sooner you start, the better. If you are 3 months or more behind, you need to start right now! Once an auction date is set for your house, the short sale process must move very quickly because our first job is to get the house removed from the auction schedule. Depending on your mortgage company, they may or may not agree to stop the auction. The bottom line, is that getting the entire short sale moving ASAP increases success dramatically. So it is imperative that you act now.
How Do I Get Started?
Call us at 757-469-4600 or fill out the web form on our “get a quote” page. There are NEVER any fees, and there is no obligation. Call for a free consultation to determine if a short sale is the right decision.