If Your House is Worth Less Than You Owe, Let’s Talk About a Short sale

The process of selling your house is stressful enough in a normal situation, but in the event of a short sale the process may seem completely overwhelming. First, what is a short sale you ask? Simple, if you owe more on your house that it is worth, you should consider a selling it for less than is owed.  Or, perhaps you have lost your job and foreclosure is inevitable.  Both of these life stressors can be alleviated by selling your house and moving on.  Of course, in order to do this successfully, you need the cooperation of your lender.

Next question – why bother? Easy, a short sale has a much less negative impact on your credit than either deeding it back to the bank, or losing it in foreclosure.  In other words, it is in your best interest to be proactive when you are faced with negative equity or a job loss.

First, talk about the options with us.  Circumstances will vary depending on the value of your home, your lender, and any other liens on your property.  In other words, do a complete evaluation of your particular hardship circumstances.  Do not make the critical mistake of waiting and hoping for better days.  Eventually the foreclosure notice will come in the mail.

  1. Understand the Process

Although there is a sharp divide in both practice and opinion, we believe being represented by an attorney is beneficial in any real estate deal, but in the case of a short sale, a lawyer experienced with short sales is critical. Once a lawyer establishes you are qualified, you will complete your lenders forms and your lawyer will communicate with the bank as well as oversee the listing and sale process.

Notice that with a short sale it’s very important to talk about a short sale BEFORE you list the property.  Other options exist, and they should all be explored with counsel before you list your home for amount of the mortgage balance and hope for the best.  A thoughtful strategy is the most successful way to short sell your home and move on.

  1. Make sure your real estate team knows what they are doing

In the event that you need to short sell your house, engaging a lawyer in advance of listing your home allows you to build the team to work together toward a common goal. Real estate agents with short sale experience are what you need.  Not an agent acting as a quasi-lawyer.  That scenario can get everyone in trouble. Short sales require a cooperative bank, a patient buyer, and a bit of luck. Experienced real estate agents will be better equipped to deal with problems as they arise and will likely be able to warn you at the beginning of the process about the most difficult parts of the process. Having a great real estate agent can also ensure you are selling your house quickly, because in a short sale price does not matter to you, only your lender.

  1. Be Patient!

Short sales require lender approval, which often is slow to come. In the event you do have an interested buyer you will need your agent working hard on the deal, but you also need to be aware the deal may fall through if your buyer finds another property.

  1. Understand what comes next

You attorney can not only help you through closing, they can also help you understand the aftermath of the sale. In the event a bank is willing to negotiate a release, you may be able to get out of any money you owe beyond the sale price of your property.  This is essential and usually the primary reason to fully participate in the sale process.  Working with an accountant or financial adviser is also something to consider to help you deal with and understand any remaining debt and/or tax consequences you may face after the short sale is complete.

If you are facing difficulties and fear foreclosure is in your future take control of the situation before it is out of control.  Evaluate your options early and often.  Surround yourself with qualified professionals.  Give us a call at Bergmann & Good if this sounds like something you need to discuss.

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