Short sales in real estate can be difficult to navigate for everyone involved. Team Lucky Duck is here to explain how it works and provide some tips to smooth out the process.
If you find that you’re having a hard time making your mortgage payments on time, your first step is to talk to your bank about restructuring your loan. If they can lower your monthly payment, you could avoid a short sale or foreclosure all together. Another option is to rent your property so that you can continue to make the monthly payment.
If restructuring your loan is not an option and you’re unable to find a renter to help make the payment, you might want to consider a short sale which is more preferable than a foreclosure. The process of a short sale is similar to a normal real estate transaction, however the bank will be more involved in every step and it generally takes longer.
What is a short sale?
A short sale is when the owner of a house sells the home for less than the amount they owe on it (which requires the banks approval). The owner may owe mortgage payments to a bank, however, they could also owe property taxes, homeowners association back dues, etc. In a short sale, everyone who is owed money must agree to take less or none of the money owed. The bank and borrower agree that selling the property at a loss is preferable than defaulting on the loan, otherwise known as a foreclosure.
A short sale can take up to 120 days and sometimes even longer depending on the situation. Do not wait to talk to the bank when you start to have trouble making payments. The more time you can provide for the bank to approve a short sale, the more likely you can avoid defaulting on the loan.
Hire a Professional
Because short sales are complicated, it is important to have professionals who understand the process on your side. With their real estate experience, they will be able to negotiate to increase the chance of closing the deal. In most cases, a bank requires that you work with a real estate agent to help you through the process.
Provide The Correct Paperwork
Banks will require documents in order to close a short sale. You must be prepared and willing to provide a hardship letter, proof of income and assets, list of liens against the property and a comparative market analysis.
If you have any questions regarding a short sale, feel free to contact us.