The short sale is a situation that occurs close to the early stages of a foreclosure. A lender allows the homeowner to sell the property for less than the amount of the outstanding principal on the mortgage.
Biggest Benefit is Time-Sensitive
The lender will accept proceeds of the transaction and may forgive the remainder of debt. Sounds so easy and uncomplicated – and sometimes it is. To achieve maximum benefit from a short sale, you need to have the following information at the tips of your fingers:
1) Know the current value of your home. Never rely on old information.
2) Make a list of all liens against your property. Concentrate on anything that needs resolution before you can produce a clean title at the closing.
3) Analyze the costs you will incur if you sell the house yourself against the costs of using a real estate broker.
4) When you add all liens, loans and costs and subtract them from the expected sale proceeds of the house, the result should be a negative number. This is the reason for calling this a short sale.
5) Keep communication lines open between you and your lender. Talk to your loss mitigation officer frequently. This person needs to understand your situation.
6) Be open to solutions that your lender may offer you. You may qualify for a loan modification or refinance – unless time is short and you really need to sell.
7) Never drag your feet. Timelines are important and your clock is ticking.
Best Benefit: Clean Slate
A buyer is not part of negotiations with the seller’s lender. Upon closing, the buyer moves in and the seller moves on.
Lenders usually report this transaction as “paid” to credit bureaus. Some might add “settled for less than owed.” It sounds negative, yet it is better than reporting a foreclosure. That could follow you around for up to ten years.