If you’re struggling to keep up with mortgage payments and owe more on your home than it’s worth, you may be considering a short sale. A short sale is when a homeowner sells their property for less than the amount owed on the mortgage, with the lender’s approval. This can be a way to avoid foreclosure and discharge mortgage debt, they can be a complicated process. In this post, we’ll explore what short sales are, how they work, and the pros and cons of pursuing this option.
A short sale happens when the homeowner owes more on the home than its market value. For this to happen, the seller’s lender agrees to accept less than the outstanding balance on the mortgage. The lender agrees to the short sale to avoid the lengthy and costly foreclosure process. The lender agrees to forgive the remaining balance of the mortgage debt, and the homeowner is released from any further financial obligation on the property. Usually the seller or buyer of the property will hire a Short Sale Negotiator to help handle the legal negotiations.
A Short Sale Negotiator will submit an offer package to the lender in order to get approval for the short sale. These offer packages are a bit different than a traditional offer package. This involves an accepted offer that is lower than the balance of the mortgage debt, and providing proof of hardship. The proof of hardship explains why the sellers are unable to make your mortgage payments. They may also include proof that the mortgage has been in default or on a Notice of Trustee Sale.
Once the lender approves the short sale, the buyer and the negotiator make negotiations with the bank agent on an acceptable price to sell based on the home’s condition, and other terms. Once the sale is approved by the bank, the sale can continue. After it is complete, the mortgage debt is forgiven. The homeowner is released from any further financial obligation on the property.
Short sales can be a useful tool for homeowners who are struggling to keep up with mortgage payments. They offer a way to avoid foreclosure and discharge mortgage debt, but they can be a complicated process. If this is something you’re considering, schedule a short sale strategy session with me. I’ve worked on several short sales and would be happy to help.
May 13, 2023