Short sales may be an alternative for homeowners whose houses’ prices have plummeted or who are having financial difficulties; however, not every landlord in these situations is eligible for a short sale. In the case of short sales, a house is sold for much less than the amount owed on any outstanding liens against it. This is a common alternative to foreclosure. Lenders interested in the property must agree to a short sale, and both the seller and the property must meet specific criteria to be eligible.
What is a short sale?
To be shorted on loan is to accept less than the whole amount owed, which is what happens in a short sale. If you owe $100,000 on your home, but the market value has fallen to $90,000, you’ll owe an additional $10,000 in closing costs. If your mortgage balance is equal to or greater than the sales price of your home, you may be able to sell it for less than the total purchase price through a short sale.
Qualifications for a Short Sale
Consider the following factors to see if you qualify for a short sale before making a final decision. Unless you meet all four criteria, you may be unable to use this home sale method.
- Home values have decreased
To prove that the house is worth less than the outstanding debt, complex comparable sales must be used as evidence. There may be a prepayment penalty attached to this unpaid balance.
- The mortgage is either in or near default
Before, lenders wouldn’t consider a short sale if a borrower was current on their payments. Lenders are eager to avoid any future financing issues, regardless of payment status. Lenders are more likely to agree to a short sale if there is a high default risk.
- The seller is in a tight spot
You’ll need to explain why you won’t be making your monthly payments or making your sale payment in a hardship letter.
- There are no assets to sell
Tax returns and perhaps a financial statement are likely to be requested by the lender. The lender may deny a short sale if it detects a sufficient amount of assets in the seller’s account. However, if a seller has assets, they may still be able to get a short sale, but they may have to pay back the shortfall.
The Procedure for a Short-Term Real Estate Sale
A lender may allow a buyer to purchase the property for less than the mortgage sum when the property is in the pre-foreclosure stage, among the three stages of foreclosures. Following are some examples of short sale procedures:
- If the bank approves a short sale, the seller will agree with a real estate agent.
- In most cases, the agent can bring in a buyer willing to pay market value rather than the mortgage amount.
- Acceptance of the buyer’s bid for sale is made official.
- The seller’s lender has accepted the buyer’s purchase offer.
- When the customer makes the payment, the lender dismisses the lien, and the seller produces the deed, the deal is complete.
Let the experts give you the right advice
Tameka Manns Realty Group is Atlanta’s rental property management company of choice. With our knowledge and experience, we aim to make each client’s real estate investment a successful one. We will provide you with the right advice on whether you should short sell or not. If you need our assistance, just let us know.