For almost two years now we've all been the victims of Real Estate overload. News, television, Friends, family... we hear about real estate today perhaps more often then we ever have. And the news often isn't good. Foreclosure rates on the rise, people being thrown out of their homes etc. Although, like seemingly everything else, the truth is never as bad as it seems, today's economy leaves many of us in a position where we're faced with tough choices regarding our home. Perhaps we are now, or shortly will be, in a position where we can no longer manage our mortgage payments. Perhaps we're managing ok but due to a job change, family issue or other reason, we're in a position where we have to sell.... but don't know if our home is worth what we owe.These are daunting scenarios, and entail some tough choices. Good choices require much thought and much information. Perhaps a "short-sale" may be the answer.
There are a lot of misconceptions, and even more conflicting information out there. We hear and see a lot of advertisements disguised as helpful information when it comes to scenarios where we might be forced to sell our home under less than perfect conditions. Here are some common misconceptions sellers may have about short sales:
You must be in default in order to Short-Sale your home: Totally false. Anyone can begin about the process of a short sale. If you are managing your payments but need to sell your home, and your Realtor isn't confident that you can sell your home for what you owe, call your mortgage holder. You'll be surprised at what options are available to you. Every bank has different guidelines and rules, but most any bank would rather take less than the full balance owed than have you abandon the property.
A Short-Sale will destroy your credit rating: If you are in default, chances are your credit has already been severely damaged by missing your monthly payments. From a credit standpoint; ANYTHING is better than foreclosure. A foreclosure will prevent you from buying another home for longer than a few missed payments, and will remain on your credit for up to 7 years. If you successfully negotiate a short-sale, your mortgage will show up as paid, but for less than the full balance. This will still impact your credit negatively, but not nearly so much as foreclosure or bankruptcy. If you are not in default, but need to short sale your home, it will negatively impact your credit, but far less so than letting yourself slide into a position where you may be forced to stop paying.
A Short-Sale is complicated and expensive: Depending on your mortgage holder's guidelines, short sales can be quite complicated, but are never expensive. Some people wrongly believe that they need to hire an attorney. A Qualified Realtor can assist you in all aspects of a short sale.
A Short-Sale is the "Last Resort": If you are in default, you have many options available to you, and the worst thing you can do is ignore the situation. New legislation is now in place that make it easier for home owners to get back on track, and mortgage companies will go a long way to try and prevent foreclosure. Foreclosure is a "Lose - Lose" situation for everyone, the bank included. The bank will usually offer the opportunity to "Modify" or "Reaffirm" your loan. If you have had a temprorary hardship, this may be the right choice for you. If you simply cannot afford your home any longer, or you need to move for other reasons, a short sale may be the best way to go.
If you are in default on your mortgage, there are many options available to you, and in almost all cases you can explore these options without the help of outside "organizations" who promise to be your advocate, but are mainly looking to profit from your misfortune.
Remember the only people who truly "work for you" are your Attorney and your Realtor!!
There are some downsides to doing a Short-Sale.The first is, you will not be getting a check at the closing. Almost all mortgage-holders prohibit the seller from profiting from the transaction if they are accepting less than the full balance owed.
Secondly, in most cases, you cannot "Short-Sale By Owner". Almost all mortgage companies require a listing history, meaning the bank wants to see the home marketed by a professional, using every means available to sell the house for the highest price possible. Statistically speaking, ANY home will sell for an average 12% more if you sell that home through a Realtor. A qualified Realtor can help you determine what options are best, and you may not even have to Short-Sale depending on the market and your ability to help sell the home!
Lastly, short sales can be frustrating. The bank will often require your Realtor to list the property for a price higher than what he or she feels it's worth. Often, the bank will not agree to lower the price until the house has been for sale for 90 days or more, and will sometimes require periodic appraisals. The good news is, if your mortgage holder is aware you are making reasonable attempts to sell the home, they will often halt the foreclosure process until the sale is completed. Even better, you can remain in the home during the process.
Doing a short sale is often taking the lesser of two evils, and may not be the right option for you at all. The best thing you can do for yourself if you believe you may need to sell your home for less than what you owe, whether you're in default or not, is to pick up the phone! Call your bank, and call your Realtor!