The best time to choose a short sale is when you owe more on your home than it is worth. Let's say that your home is worth 450,000 and you owe 470,000 then a short sale would be the way to go. Obviously, if you do not have to sell your home, you could wait out the market and hope for a turnaround in real estate values.
If you cannot wait out the market, then you have three options available to you. The first one involves bringing cash to the table. In the example above you would sell your home for $250,000 and pay another $10,000 to the lender out of your pocket to pay off the loan on your property. Your second option is to foreclose on you home. Your bank will foreclose on your home and evict you from the premises. They will sell your home to highest bidder at a foreclosure or Trustee's auction. Your third choice is to pursue a short sale. A short sale involves contacting a specialist who will negotiate with the lender on your behalf. The specialist will explain your situation and ask the bank to take less than the value of your home for payment.
In a case where you have a buyer for 240,000 and your loan is for 250,000, you would then explain to the bank that there aren't any buyers willing to pay a higher price. You can continue with a short sale when the lender agrees to the lower amount. Sometimes the lender will consider a short sale before you have a buyer and you can market your property and, if you find a buyer, take their offer to the lender for consideration.
Fortunately, short sales are not complicated but they do require some leg work for you and your short sales specialist.
You have to find out what your home is worth. Your short sales specialist will do market analysis which will help you to determine what your home will sell for. You can also use the Internet to help you in this process, there are many real estate sites that you can compare listings to help you determine the value of your home. If the market is moving down keep in mind that your homes value may be moving down as well and estimated valuations may be valid for only a short time.
You must also figure out how much it will cost to close. Items such as a title report, escrow, appraisal, attorney fees, agent commissions, unpaid property taxes etc. may add up to a substantial amount of money.
You will need to be aware of how much you have left to pay on your home, include all loans in this calculation.
Calculate your equity. In a normal case closing costs and loans will add up to less than the value of your home. When the opposite is true you can then pursue a short sale.
Your short sales specialist will be talking to someone in authority at your bank who is required to make these decisions. Usually lenders have a "loss mitigation department" that you can contact. Banks do not have to accept your short sale offer, but in most cases it benefits them. Some banks will not take a short sale unless you are behind on your monthly installments. You need to make sure your bank accepts short sales so get in touch with them as quickly as you can.
Understand where you stand with taxes. Do not underestimate this! Many times there can be a substantial tax obligation after a short sale has occurred. Make sure you talk to your accountant or short sales specialist to calculate your tax before going with a short sale.
If you cannot wait out the market, then you have three options available to you. The first one involves bringing cash to the table. In the example above you would sell your home for $250,000 and pay another $10,000 to the lender out of your pocket to pay off the loan on your property. Your second option is to foreclose on you home. Your bank will foreclose on your home and evict you from the premises. They will sell your home to highest bidder at a foreclosure or Trustee's auction. Your third choice is to pursue a short sale. A short sale involves contacting a specialist who will negotiate with the lender on your behalf. The specialist will explain your situation and ask the bank to take less than the value of your home for payment.
In a case where you have a buyer for 240,000 and your loan is for 250,000, you would then explain to the bank that there aren't any buyers willing to pay a higher price. You can continue with a short sale when the lender agrees to the lower amount. Sometimes the lender will consider a short sale before you have a buyer and you can market your property and, if you find a buyer, take their offer to the lender for consideration.
Fortunately, short sales are not complicated but they do require some leg work for you and your short sales specialist.
You have to find out what your home is worth. Your short sales specialist will do market analysis which will help you to determine what your home will sell for. You can also use the Internet to help you in this process, there are many real estate sites that you can compare listings to help you determine the value of your home. If the market is moving down keep in mind that your homes value may be moving down as well and estimated valuations may be valid for only a short time.
You must also figure out how much it will cost to close. Items such as a title report, escrow, appraisal, attorney fees, agent commissions, unpaid property taxes etc. may add up to a substantial amount of money.
You will need to be aware of how much you have left to pay on your home, include all loans in this calculation.
Calculate your equity. In a normal case closing costs and loans will add up to less than the value of your home. When the opposite is true you can then pursue a short sale.
Your short sales specialist will be talking to someone in authority at your bank who is required to make these decisions. Usually lenders have a "loss mitigation department" that you can contact. Banks do not have to accept your short sale offer, but in most cases it benefits them. Some banks will not take a short sale unless you are behind on your monthly installments. You need to make sure your bank accepts short sales so get in touch with them as quickly as you can.
Understand where you stand with taxes. Do not underestimate this! Many times there can be a substantial tax obligation after a short sale has occurred. Make sure you talk to your accountant or short sales specialist to calculate your tax before going with a short sale.
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