What is a Short Sale?

A short sale is the latest and greatest thing when it comes to a homeowner selling their house when they can no longer afford it. A short sale means the bank, who is the lien holder, agrees to take less money than what they are owed for the home.

This transaction relieves homeowners from the property and transfers ownership to the buyer, just like a regular transaction. You should have an experienced realtor list your home for you because they will be communicating with the bank to make this happen.

Why Do a Short Sale?

A short sale is the best way to get relief from mortgage debt, but is not always the smoothest transaction. Unfortunately, every bank has their own internal processes and some are smoother than others. If you have experienced any financial hardship (loss of job, additional expenses, illness, etc.) you may qualify for a short sale.

Steps in a Short Sale?

When you decide you can no longer afford your home, or you have been late on your mortgage payments, you should talk with your lien holder.

There are many programs available to help homeowners with late payments, etc. If you decide to sell your home and do a short sale, these are the basic steps you can expect.

1. Choose an experienced realtor to list your house and to help negotiate with the bank. Realtors work with different departments than homeowners, and a lot of times can get more results.
2. List the house as soon as possible. The bank will want to see that it has been listed for market value and you’ve attempted to get full value for it before they will approve a short sale.
3. Submit a hardship package to the bank. Most bank websites have instructions for this online. Basically, it will consist of a detailed hardship explanation letter, copies of last 2 years taxes, last 2 month bank statements and paystubs, and a copy of the listing agreement.
4. The bank will review your package and determine your eligibility for a short sale. They will have the property appraised and wait for an offer. This process can take a few weeks, months, or in some cases, a year.
5. At this time the realtor will change the value to a lower amount than what you owe. Sometimes the bank will approve a particular amount and other banks offer no guidance. The realtor will be working with a negotiator at the bank to review any offers and hopefully try to make sure it’s listed for an amount they will accept.

These are the basic steps in the short sale process.

Each bank is different and their processes are different. You will have to have some patience when doing a short sale whether you’re the buyer or seller. Be sure to work with an agent to make sure this is the best move for you. It can put you in a better financial position and is a good last resort option, but only if you must sell the home.