If you need to sell your home but find that you owe more on your mortgage than the current estimated market value of your property, a short sale may be the best solution.
A loan modification is a better option if you prefer to keep your home but can no longer afford it. In that case, you should immediately contact your lender and a housing counselor to explore your options for refinancing or modifying your loan.
If those efforts have failed or your lender has begun foreclosure proceedings, you should contact a Real Estate Professional who has experience in short sales to start that process. A short sale refers to an agreement between you and your lender that the lender will accept less than the full payoff amount for your mortgage.
Short Sale Details
A short sale requires negotiations between multiple people, so it is best to have an expert on your side throughout the process. One negotiation takes place between you with your listing agent and the buyers with their agent, just as with any other home sale. In addition, though, your lender must accept or decline the buyers’ offer.
If you have private mortgage insurance (PMI) or a second loan, such as a home equity loan, on your property, the PMI company and a second lender may also have to approve the short sale. Most lenders have investors who also have a say in which loans get approved. The likelihood of a short sale offer being accepted depends in part on how much of a gap there is between the offer and your mortgage balance.
In order to have a short sale agreement accepted by your lender, you will need to provide a hardship letter explaining why you are unable to make your mortgage payments. The letter needs to be supplemented with a financial worksheet with complete details about your current circumstances, tax returns and pay stubs.
Your Real Estate Professional will also need to provide documentation, including a listing agreement for your property. Once you have an offer, your Real Estate Professional will need to submit that offer along with an estimated HUD-1 Settlement Sheet that will show the potential proceeds from the sale.
Find a Short Sale Expert
Given the complexity of paperwork and negotiations with several different parties, it’s essential to work with a Real Estate Professional with expertise as a short sale listing agent. Some Real Estate Professional’s specialize in short sales and work with attorneys who can be consulted to represent your interests. While not all experienced short sale agents earn the designation, many become a Certified Distressed Property Expert (CPDE), which means they have completed educational coursework related to short sales and foreclosures and they have had experience in the process.
Your listing agent will need to respond quickly to requests from the lender or from a buyers’ agent about your property in order to move the process forward.
To find a short sale agent, you can search online for agents who advertise short sale experience or for agents with the CDPE designation in your area. You should verify the agent’s real estate license and check for complaints against him on your state real estate commission’s website.
It’s important to interview a few potential short sale agents and ask them:
- Do you have your CDPE designation?
- How many short sales have you been involved with? Did you represent the buyers or sellers in those transactions?
- Can you explain the short sale process to me?
Your listing agent is an essential part of the outcome of your short sale, so choose someone whom you can communicate with easily and who gives you confidence that the transaction can be completed.