Short sale: a tool of last resort

Underwater Mortgage

If the market value of a homeowner’s home is less than what they owe on their mortgage – they would have to bring money to the closing table in order to sell it. Paying tens of thousands of dollars to sell a house is just not within reach for most people. A way to avoid this situation is to negotiate a short sale.

 Short Sale Explained

A short sale is a great option if a homeowner is already behind on payments, has little or no equity in their home, and wishes to avoid a foreclosure. The process of a short sale involves using one of our specially trained real estate agents to negotiate with the mortgage lender. The goal is to have the lender allow the homeowner to sell the house at a lesser amount than what is owed on the mortgage, and forgive the rest of the debt.

Most commonly, the foreclosure is postponed during the negotiation process. Once the lender agrees to allow the sale of the house for less than the amount owed, and forgive the balance, foreclosure is prevented altogether.

How Does A Short Sale Affect Me?

A short sale will negatively affect the homeowner’s credit; although not as much as a foreclosure. In some cases, the lender may refuse to allow the short sale, in others, they may not be willing to negotiate down to a reasonable sales price. In both of these scenarios, it is common for the house to continue onto foreclosure.

For some government employees, a short sale may have a negative impact on their security clearance. In cases where the house is not the owner’s main residence, the lender may issue a 1099C; this is when the forgiven debt becomes Phantom Income to the owner and they will be taxed on it.

Sold ASAP May Be Able To Help

Short sales are highly complex negotiations that take significant time, paperwork, and expertise. They are among the most complex transactions that take place in real estate. Luckily, we at Sold ASAP have negotiated short sales with many lenders and can work on your behalf to put you in the best situation possible.

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Common questions about short sales.

How long does a short sale take?

Short sales can get complicated. Most usually take many months, in rare cases even years. 

Can I do a short sale myself?

No, a lender will need a purchase offer and “Proof of Funds” before they will even consider negotiating a short sale. We will provide these when negotiating a short sale on your behalf.

Do I have to bring money to closing with a short sale?

Not very likely since the lender will pay all of the closings costs, commission, taxes, and fees on behalf of the property owner. There have been instances where the lender will go after the homeowner for a deficiency judgment; an event where the lender sues for their loss, but this is quite rare.

The mortgage was underwater. But you successfully negotiated a short sale with my lender. Now I can finally start living worry free. Keep up the fantastic work!