How to Short Sale Your Home

April 19, 2011 by  
Filed under how to short sale your home

Key Words: short sale, real estate, instructions, property obligations, property loans, process, tips, warns

How To Short Sale Your Home 

If you’re thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. Short sale often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers.

The general processes of doing a short sale are:

1.  Verify the value of your property

2.  Add up all the costs of selling the property

3.  Determine the amount owed against the property

4.  Do the calculations: Subtract the total amount owing against the property from the estimated proceeds of the sale.

5.  Contact the lender(s)

6.  Ask the lender what its procedures are for a short sale

7.  Sell the property

Here are some tips and warns to remember when you are starting the Short Sale process:

  • Closing costs will include title and escrow fees (if the seller is responsible for any portion of them, which will depend on your county), attorney fees, a portion of unpaid property taxes, re-conveyance fees, notary fees, delivery fees, documentary fees and/or transfer fees.
  • If you sell the property without the assistance of a real estate broker, you will save the amount of the commission and have more to apply toward paying off your loan.
  • If you feel more secure having a real estate broker handle the transaction, consider using a discount broker to market your property. You could also try to negotiate the sales commission with your broker.
  • Remember that the amount on your monthly loan statement does not include interest. Interest is accrued until the date a loan is paid off, so you may have as much as 30 days of interest on top of the balance owing, and you’ll need to include this interest in the total payoff amount.
  • If a property is sold under a short sale, the lender may require the buyer to make up the difference, either through a personal obligation or a collection.
  • The IRS often gets involved with short sales, because they are seen as a relief of debt and may be treated as income. Check with your accountant.

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