A short sale is different from a foreclosure. A short sale is when the net proceeds from the sale of your property won’t cover your total mortgage balance and closing costs and you don’t have other sources of money to cover the deficiency. A foreclosure is when the bank (or your lender) takes title of your property and puts it on the market. The process can be a very emotional one for you and your family. It is important to realize that in the end you’ll be relieved from the stress of dealing with a difficult financial situation and you can start looking at the future again.
- The first step to take if you are thinking of selling because of financial hardship, is to contact your lender and talk about loan modification, i.e. lower interest rate,different payment plan, providing a forbearance period if the situation is temporary. If it turns out that neither is enough to relieve your financial problems, your best option could be a short sale. The lender has to agree to a short sale.
- Always consult a tax-advisor or attorney or both before entering into a short sale.
- Work with a real estate agent who understands the short sale process. Your agent can:
- Help you set an appropriate listing price , market your house and get it sold.
- Ease the process of working with your lender (s).
- Negotiate the contract with the buyers.
- Help you put together the short sale package to send to your lender (s) for approval. Lender and other lien holders have to agree to the sale and release the lien so that the buyers can get clear title (reason why short sales take longer).
4. Start gathering documentation before offer comes in. The short sale package that accompanies an offer typically includes at least:
- A hardship letter detailing your financial situation
- A copy of the purchase contract and listing agreement
- Proof of your income and assets
- Copies of your federal income tax returns for the past 2 years
5. A short sale doesn’t always solve your financial problems, that’s why it is very important to consult a tax-advisor and or attorney to go over your specific situation.