Sometimes you job, health, or finances force you to move and you can’t sell your home. What can you do?
For starters, let’s clarify the issue: chances are, you can sell your home. However, you don’t want to sell it for an amount below its value or below what you owe on it.
Forced to Move
Some people just walk away from their home and start over – not advisable. This impacts your credit rate badly. In fact, it’s the worst possible thing you can do to your credit!
One possibility for solving this matter is to tell your Lender the truth. The Lender doesn’t want a foreclosure either; it will cost their company money. Explain your financial situation, and then ask them if they can help you with a short sale on your property.
In order to back this request up, you’ll need draw up a financial statement. This will show your assets and wages and will prove to them that you have no more money left to pay the mortgage.
You’ll also need a current market evaluation of the property from your real estate agent, and an offer from a prospective buyer. If you don’t have this, you’ll need to persuade your Lender that you can arrange all this.
This is where the crunch comes in. You must be genuinely without cash, assets, savings, investments or liquid retirement funds or anything that could be turned into cash.
Why So Stringent?
Why are they being so stringent? The Lender is going to take the loss for you. Therefore, he wants to make sure that you’re not pulling a fast one on him!
Here is what happens: your mortgage is worth $400,000. Your house, at this time, is only worth $370,000.
You’ll lose $30,000 plus costs. If a buyer can be found, the Lender will ‘write off’ his loss of $30,000.
You’ll have to talk to the Loans Department of the Lender concerned. Once this is done, your real estate agent will start to prepare the deal.
At this point, both you and the buyer will have to be patient. There are several people involved in the decision over whether to accept the prospective buyer’s offer or not. Firstly, the Lender is probably only the middle man, so an actual ‘investor’ has to approve of the loan. Assuming you have mortgage insurance on the loan, the next step is to get the Insurance Company to agree.
Short sales can take even longer in cases where there’s a second mortgage held on the property; they also want ‘a cut’ of the capital released; sometimes having the second mortgage on a property makes the deal too difficult to negotiate.
There is one positive aspect to all this, and that is your newly-acquired expertise in short sales procedure. You are now familiar with it, and may be able to buy a new home through a short sale, thus offsetting some of your losses.
Be aware that the IRS looks upon short sales as a forgiveness of debt, and as such this counts as income. This means that you have to declare it to the IRS in your yearly returns.
I have experience, as an agent, with short sales. I’d be happy to talk to you if you feel forced to move and want to consider a short sale.