Q. I can no longer afford my home and I just got a job in a different state. My home lost all of its value over the last couple years. There’s no way that I can pay a real estate agent commissions to sell my home. I keep hearing the term short sale. Can you tell me what that means?
A. A short sale is a term used in the real estate industry when you sell your home for less than what you currently owe on your mortgage. For example, if you owe $200,000 to your mortgage lender on a home that is only worth $100,000, then this home would be considered underwater. If you wanted to sell your home for less than what you owe, you would then have to apply with your lender to get approval in order to perform a short sale on your property because they will need a sign off and accept any offer that you would recieve on your home.
Please be aware that the mortgage servicer is going to be in charge of the sale at all times. You do not get to provide any input or accept any offers that you might receive on your home. You or your real estate agent are going to have to submit a written purchase agreements with estimated closing costs (estimated HUD) to your mortgage servicer and then they will decide if they want to accept the deal or not. This is easier said, than done.
We are currently in a massive foreclosure crisis with thousands of homeowners looking for help. This is causing the system to be bottle-necked with many unnecessary foreclosures. Many loan modifications and short sales end up failing because of this communication and employee breakdown. You may get 3-5 offers before one goes through. So, this is a numbers and patience game. You and your agent have to make sure at all times that you do not get lost in the system by being that greasy wheel.
The best thing that you can do is consult with two or three lawyers in your state to determine your best options. Maybe they will tell you that it is just better to walk away from your home and a short sale is not a good idea because your mortgage is non-recourse. In addition, you should seek out a couple of highly experienced short sale real estate agents that you can interview to get their opinions. A good agent will tell you the truth and be able to help you through this process. This experienced agent will handle most all the headaches that come your way when dealing with the sale. Please do not use any company or agent that charges you an upfront fee. Find a Realtor that will work on commissions only and if your home sales, your lender will pay the agent and other closing costs out of the sale proceeds.