If you think you may need to sell your home as a short sale, there are some things you should do to prepare. A short sale means that because of a financial hardship you need to sell your home for less than what you owe on your mortgage. The bank holding your mortgage will need to approve the sale as they will be taking a loss on your mortgage.
- Once you realize you won’t be able to make your mortgage payments it is time to talk to your lender – the sooner the better. Depending on your situation, there is a chance you could keep your home by modifying your current loan.
- Check in with your accountant. Whether the bank forgives your loan or not, you may be responsible for paying taxes on the forgiven amount. Second and third mortgages may have promissory notes you will need to pay. Finding out how a short sale will affect your specific financial situation is important. In some situations, it may be advantageous to consult an attorney.
- Collect your financial documentation. The bank will require you to submit all your financial information including tax returns, bank statements, pay stubs, W-2’s and all other financial documentation you have. All the documents will help support your claim of a financial hardship. Keep these documents handy for when you officially start the short sale process
- If you determine your only option is to sell your home as a short sale, finding a Realtor who has experience in working on short sales is key. The short sale is a long process and a Realtor who has experience can help the process move along more smoothly. Get your home listed right away, hopefully finding a buyer quickly, and getting the negotiation process started.
- Be prepared for a long ride. If you have one mortgage, you can expect the negotiation process to take two to three months, and then another month to six weeks to close on the deal. If you have a second or third mortgage, the time may be longer as they are often negotiated by the banks after the first mortgage.
Short sales are long and difficult, but if you need to sell because of your current financial situation, it can be a good way to get you out of your home with less financial implications than a foreclosure or bankruptcy.