If hard times have fallen upon you and making your mortgage payment has become difficult to impossible, you may be on the brink of the lending company foreclosing on your home if you are behind on your payment plan. While foreclosure may seem imminent, selling your home may be the quickest solution.
However, while selling your home may be the most obvious solution, it may also be the most difficult task to accomplish, especially if it needs to sell quickly. If the real estate market in your area is flooded with homes for sale and you owe more than your home’s market value, you have a real problem in getting it sold. Not only is there a lot of competition, you are having to ask more for your house so that you can try to cover the mortgage. If you are underwater, that is, you owe more than it is worth, then short selling may be your option for a quicker sale.
Short selling is when you sell your home for less than is owed on it, but it must be approved by the lending company and you must meet certain qualifications before the transaction can occur. The first criterion is what we have already mentioned – you must be underwater.
The next qualification for a short sale approval is that the seller must have a hardship or be in danger of a foreclosure. Many people today are facing hardships due to the slow economy which has existed for several years and has resulted in the loss of many jobs. Still, other people are experiencing hardships for other reasons, such as chronic illness.
Some contingencies also exist on the buyer’s side before a short sale can occur. As with any real estate sell, the buyer must qualify for the purchase of the property. Hopefully, the buyer has already been preapproved for a certain mortgage amount, but there are people who will waste your time and the realtor’s time looking at houses knowing that they do not have funds in place.
While not through a short sale, my wife and I are trying to sell our home and had what we thought were solid candidates. The husband and wife looked at our home three times with their realtor over a course of 4-5 weeks. On the third trip, they asked a contractor to come with them because the husband wanted to build a workshop in the backyard. The realtor said that she had shown them several homes and each time, they kept returning to ours as they tried to make their decision. Also, each of the times that they looked at our home, which is lived in, it was always an urgent request - meaning the same day. In the end, they did not have the funds to match their dreams and only wasted everyone’s time.
Finally, the lending company must approve of the price for the short sale. They are going to want to get as much as possible to minimize their losses. However, they also realize that they stand a better chance of eliminating or reducing the mortgage debt through the short sell than they do through a foreclosure, and sooner than if bankruptcy is filed. Usually, this price is going to be around the current market price, but it could be less. Currently, a house in my neighborhood is under a short sale contract for $100 thousand dollars less than the market price.