Short Sales: Tips For The Homeowner

By: Donte Aka GetSmart
Submitted: 07:19PM on Saturday 27 September 2008

Short sales are becoming to hottest topic when there is a declining market. If you turn on the news, you even hear about short sell investors in the stock market.

Short sells and short sales are two totally different markets. Short sales are for homeowners that are over-financed on their mortgage or completely bad terms that could cause a potential hardship for the homeowner. In other words, the mortgage is usually more than the home is worth.

There are a few reasons why a lender would consider a short sale price on against the mainly due the cost of a foreclosure. Now that the majority of the markets across the country have more inventory than buyers, will help a lender influence their decision. It makes more sense to accept a fire sale now than to hold onto a property for 9 months to a year.

The cost to maintain the property can really get the lender to consider a short sale. In some communities crime can really play a role in lowering the value of a home and lenders would like to cut their losses early.

The following is why short sales are the best option in certain situations:

Why Should a Homeowner Short Sale their property?

Short sales can help a homeowner to sell their home faster by lowering the price to make the house more competitive with other houses.

What about the difference in what's owed and what the house sells for?

If you short sale your primary residence and you are insolvent, according to the Mortgage Forgiveness Act of 2007, the IRS will forgive the debt owed. If you get signed up with a good tax accountant, you can have your debt written off. Plus with a short sale you can get your lender to agree not to come after you for the remainder balance.

How long does a Short sale take?

From the time your lender receives a complete short sales package can take anywhere from 2 months to 6 months. The key is to have everything your rep. needs when they review the package.

Do I need a real estate agent?

If you have to ask you probably do or you can use a professional company that specializes in short sales.
I want some money from the sale is that possible?
More than likely they won’t allow if you have a conventional loan. Only FHA makes in mandatory for the homeowner to receive cash from the short sale of the property. Usually that money goes towards closing costs and whatever money is left over goes to the owner. The most you can receive from a FHA back house is $1,000.

Conventional lenders will require you receive no proceeds from the sale of your house.

A company offered me cash if I agree to sell my house to them, is this ok?

No, this is not ok and can cause problems if your lender finds out. All it takes is for the investor to mess up one time and all the deals they constructed can fall apart down to the deal where you accepted money.

Plus, any company that wants to pay you, but can show your payment on the HUD is not the type of person you want to sell too. They can flake you at the last minute because you know you can't receive cash at closing. They will normally agree to pay you some time after closing and vanish a few weeks later.

They want to buy my appliances!

If that's the case then your lender would want to be included on the take since you probably wouldn't have sold the buyer your stuff had the house not sold. One tell tale sign is that the appliances should be bought before the sale, not after.

Summary

These tips should help homeowners that face common issues that come up when they want to sell their home through a short sale. If you are insolvent with a true hardship then you should be able to short sale your house. The price depends on the BPO agent and buyer.