A short sale (also called a pre-foreclosure sale) is one of your options to prevent a foreclosure on your home. And iff you want to avoid foreclosure you need to move fast – so contact us today so we can help!
A short sale is the type of sale you will have to do if you are upside down on your house. If the property’s sales value is not enough to pay the loan in full, the lender may allow you to sell it for less than the total debt.
A short sale is an arrangement between the owner of a home and the current mortgage lender to accept less than the total amount owed to pay off the home loan. The lender agrees to accept the amount of the sale as full payment of your debt, even thought it will be “short.”
The lender must approve a short sale in advance. They must agree to accept less than the full amount owed. You cannot force them to agree to a short sale.
This requires a negotiated agreement with the lender to accept your short sale and avoid a foreclosure on your home. The Short sale process will be long and frustrating, and you may have to make difficult last minute decisions. Therefore you need to know all your options now, so if something unexpectedly comes up at the settlement table you know what to do.
Our team at We Sell Harford Homes can explain your options in a consultation, and we are experienced in negotiating shortsales with the lender for a short sale. We work with a shortsale negatiation company, who does everything possible to have a shortsale approved (no matter how long it might take). If you hire an agent experienced in short sale process, the lender will know you are serious. They know that your fall back option if they do not agree to the short sale is bankruptcy.
Also, you need to know your bankruptcy options. One of the main reasons for doing a short sale is to avoid bankruptcy. However, in some cases the bankruptcy is the better option. You simply have to know those options before you take action.
You Need A Team Of Advisors
If a short sale is right for you, you are going to need more than a lawyer. You are going to need a team of consultants – a real estate agent, a tax adviser and a lawyer. And we can help guide you so you don’t have to stress about the whole process.
You need a realtor for a number of reasons. First, keep in mind that in a short sale you are selling your home. If you want to sell any kind of real estate, it is our strong legal advice that you hire an experienced real estate professional to do so.
In fact, you should hire a real estate professional who has extensive experience in short sales. Short sales are WAY too complicated to handle on your own.
Second, if you do not hire a realtor to actively market your house, the bank will assume you are just stalling and do not really intend on following through.
You need an accountant to avoid creating a huge tax headache. If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable. The last thing you want to do is sell your house and think your troubles are over only to find out at tax time that you’ve gone from having a mortgage problem to having a tax problem. Therefore, you need to look at the possible tax consequences of a short sale.
Unfortunately, the sale of the house will depend on the lender’s approval
If they wish to consider a short sale, the lender will analyze the facts of your particular case and determine if you are eligible to sell the home at less than the outstanding debt. If they agree, the lender accepts that shortfall as their loss.
But anyone who is thinking a short sale is right for them must be aware that the ultimate decision on approval of a short sale is going to be made on the best interests of the lender. It is not easy to get the mortgage lender to agree to a short sale.
Think about it. You are asking them to take a guaranteed loss on the property. You have to provide the lender with very good reasons for taking the deal, such as avoiding the costs of foreclosure or avoiding forcing you into a bankruptcy.
In some situations, it may be better for the lender if you file for bankruptcy. If the Bankruptcy Judge forces you to file a Chapter 13 instead of a Chapter 7, the lender will sometimes get more favorable repayment terms by forcing you to file bankruptcy. It really depends on the details of your specific situation.
A short sale may be an excellent option if you cannot keep your home and want to avoid a bankruptcy. Often, mortgage debt is the one thing that ruins a person’s finances, and if they could just get rid of that excess debt they would be able to afford their other bills.
If you are considering whether or not a short sale is right for you, you should consult with an attorney. And if you have any questions about the a short sale process in Harford County, MD and surrounding areas – you can always contact us (the agent experienced in short sales).
What should The Buyer Of A Short Sale know
The buyer of a property in a short sale should be aware of several key issues. The contract is usually contingent upon the agreement of the seller’s mortgage lender to accept the net proceeds of the sale as full payment for the underlying debt. This is often a long process, which can delay an anticipated settlement date, and buyers and agents should be prepared for this possibility.
Ideally, the lender pre-approved the short sale prior to advertising on a Multiple Listing Service, but the fact that the property is a short sale should be disclosed in the comments section of the listing. The sales contract should also include a third party addendum, outlining that the contract is contingent upon the agreement of the seller’s mortgagee to accept the net proceeds of the sale as full payment of the underlying outstanding debt.
Conclusion & Next Steps
As always, if you are considering a short sale, or any real estate transaction, whether you are a seller or a buyer, it is important to seek competent legal and financial professional advice. Get a consultation with us, and be sure you deal with a real estate professional with experience on short sale transactions. We will be happy to recommend some good professionals with experience in short sales in Harford County, MD and surrounding areas if a short sale is right for you.
Steps in the Short Sale Process
The following steps are involved in the short sale process in Maryland:
- The sellers are unable to meet their mortgage liabilities due to hardship, such as loss of employment, divorce, or illness, among others.
- The sellers should speak to the mortgage company to understand whether they would do a loan modification (making changes to the current mortgage terms to reduce the amount of the current payment) or if the bank has any other provisions to help them retain the home.
- After it is determined that the lender cannot help the seller retain the property, the seller should consult local short sale specialists. This is crucial as the skills necessary to navigate a short sale are quite distinct from those required for a home sale with equity.
- Put the property on the market. A key difference in marketing a short sale and a home with equity is that while preparing a property for a short sale, very little or no money should be spent on making home improvements.
- The agent will evaluate the price and terms with sellers once an offer is made on the home. In case the sellers find the offer acceptable, they will reach out to the bank(s) for approval. At this point, the real fun begins. It can take time to get approval from banks (also known as third-party) approval.
- The buyer can still undertake property inspections but will likely meet resistance if they require any repairs as the sellers may be unable to pay for repairs, and the banks are also unlikely to make any repairs.
- The bank(s) will arrive at a decision and will approve the short sale in writing. If the sellers are in agreement with the terms, it is time to prepare for closing.
- At this time, the buyer will submit all final loan documentation, the appraisal will take place, and closing will be scheduled (usually with a period of 30 days).
Every short sale is different, but all of them will test your patience. Therefore, the buyer and seller of a short sale must have realistic expectations.