Things You Need To Know When Going Through A Short Sale

If you find yourself underwater regarding your mortgage, basically, if you owe more than the appraised value of the home, then you may be wondering what your options are. On the one hand, you can stick with it, and try to catch up, but with how the market swings that may not be feasible. On the other hand, if your lender agrees, you might be able to sell your house fast during a short sale.

In this article, we will talk a little bit about short sales and highlight a few things to expect during the process.

What Is A Short Sale?

Simply put, a short sale is when you get approval to sell your house for less than what is owed. If you have a second mortgage, both lenders will need to approve the sale. That being said, lenders are generally more apt to allow a short sale, rather than go through the process of foreclosure, which is a lengthy and expensive process. The compromise is that the seller will take the credit score reduction that comes along with a short sale.

The Short Sale Process Is Far Different From A Regular Sale

From the point of view of the seller, before the short sale can even start, you will need to show the bank why a short sale is needed. This can mean providing documents like tax and wage paperwork. Usually, the bank will also require a statement called a “hardship letterâ€, which is a letter from the party responsible for the mortgage, explaining why their need to sell the home via short sale, and details the financial situation and circumstances that led to this need.

You Will Need An Experienced Agent

There are two reasons for this, firstly a short sale has paperwork unique to the process, and also the home is essentially being sold in an “as-is†condition.

Your agent will help to guide you through the generally complicated processes of a short sale easier than an agent who has only done a couple. Make sure they are experienced and familiar with the process.

With a traditional sale, there is usually an inspection, then an offer that can include credit for uncompleted repairs is made. This is not how a short sale works, the bank is already losing money on the deal, so the buyer will need to accept responsibility for any and all needed repairs.

Two Common Short Sale Misconceptions

1. If I short sell, I will not be able to buy another home for many years.
   1. Not entirely true, you may be able to get an FHA loan as soon as three years after the short sale. That being said, guidelines differ from lender to lender.
2. A Short sale will destroy my credit.
   1. While it will certainly affect your credit, there is no one single answer on exactly how it will affect your credit. For example, if you pay on time, a short sale will lower your score, but not by the degree that missed payments would have.