Short Sales Secrets From Real Estate Expert
When the value of your home is less than the amount that you owe on your loan, you should consider a short sale. For the sake of argument we’ll say that your home is worth 350,000 and you owe 360,000 then a short sale would be a good option to pursue. However, if you don’t have to immediately sell your home then you could always wait and see what happens in the real estate market.
However, if you do have to sell your home you basically have three options. First, you can bring cash to the table. Say you sell your home for a $10,000 deficit, you would have to come up with that money immediately for the bank. Second, you could let the home go into foreclosure. The lender will go through the foreclosure process, force you out of your home and then auction it off to the highest bidder at a foreclosure or Trustee’s auction. The third option is to pursue a short sale. You contact the lender, explain the circumstances and convince them to take less than full value of their loan.
In a case where you have a buyer for 240,000 and your loan is for 250,000, you would then explain to the bank that there aren’t any buyers willing to pay a higher price. You can continue with a short sale when the lender agrees to the lower amount. Sometimes the lender will consider a short sale before you have a buyer and you can market your property and, if you find a buyer, take their offer to the lender for consideration.
Fortunately, short sales are not complicated but they do require some leg work for you and your short sales specialist.
Figure out the true value of your property. Your short sales specialist will do market analysis which will help you to determine what your home will sell for. You can also use the Internet to help you in this process, there are many real estate sites that you can compare listings to help you determine the value of your home. Take into consideration that the market is constantly moving and your value may only be valid for a short period of time.
You must also figure out how much it will cost to close. Items such as a title report, escrow, appraisal, attorney fees, agent commissions, unpaid property taxes etc. may add up to a substantial amount of money.
You will need to be aware of how much you have left to pay on your home, include all loans in this calculation.
Calculating your equity is essential. In a normal case closing costs and loans will add up to less than the value of your home. When the opposite is true you can then pursue a short sale.
Be sure you talk to someone who has the authority to make the required decisions. Loss mitigation department at your bank is usually the first step. Lenders do not have to accept your short sale, but most of the time they do because it is in their best interest. Some banks will not take a short sale unless you are behind on your monthly installments. Your lender may not accept short sales so contact them a soon as possible to find out.
Understand where you stand with taxes. Do not underestimate this! Many times there can be a substantial tax obligation after a short sale has occurred. Make sure you talk to your accountant or short sales specialist to calculate your tax before going with a short sale.