Under normal circumstances, homes are sold using a real estate agent on the open market. However, sometimes, it becomes necessary to sell a home when the mortgage value is more than what the home can sell for. This is called a short sale.
A short sale is often wrapped up in a lot of emotions for the seller, which can make it easy to make a mistake somewhere along the way. But while the stakes for a short sale are higher than a traditional sale, there's no reason to feel overwhelmed. Once a seller understands the steps they need to take, it can be easier to sell the home and move on. Use these tips to have the best possible success.
See the Bright Side
Seeing the bright side of the short sale can make it easier to take the next steps, and there are a few perks of a short sale that sellers shouldn't ignore:
- Credit score: Short sales affect a credit score less than a foreclosure will.
- Power: Sellers have the power to negotiate with their lender which can help them feel more in control.
- Release: Getting out from under an investment can be a huge weight lifted off a seller's back.
Sayreville home sellers first need the approval of their lender before a short sale. Because short sales tend to net less than what a lender is owed though, the lender's approval is not always a guarantee for the homeowner. They may first ask to see solid evidence that a homeowner isn't able to keep up with their financial obligations.
On the other hand, a lender doesn't necessarily want to auction off the house either, so they may be more willing to negotiate than buyers think. This is where it helps a seller to know how to negotiate in their favor. A seller's credit score is largely determined by how many mortgage payments they've missed over the preceding months. When the seller pays the lender, the lender can either label the debt as paid or settled.
In terms of credit score, the 'paid' label will be less destructive to a credit score. Short sales can be tricky for sellers, especially because the rules vary from state to state. Sellers may think that settling their debt is enough to release them from liability, but this is not always the case. They may receive an enormous bill months after they move into a new home. To avoid unpleasant surprises, sellers can negotiate a waiver that specifically states the release of mortgage liability so long as the seller meets the pre-determined minimum amount.
Understand the Lenders
Lenders want to see how many assets a homeowner compared against their total debts. This is known as the debt-to-income ratio, and it has a big impact on how lenders move forward. If a seller's ratio has risen significantly, meaning they have more debt, the lender is more likely to approve the short sale.
Now is the time for sellers to come clean about the state of their assets. If there's a lien on the home or their savings account is dwindling, they'll want to share this information immediately. Finally, lenders may want to see the market analysis of the neighborhood of the property. If it's likely to fetch more on the open market rather than an auction, this can make it easier for the lender to move forward.
Hire a Pro
Once the lender approves the sale, it's time to hire some help. Short sales are time-consuming and complicated, and it's all too easy to get lost in the many details. A real estate agent with a history of short sale experience can be exactly what a seller needs to settle with their lender for the right price. As sellers search for someone with the expertise they need, they should ask questions to clarify how many short sales the agent has successfully completed and how long their average escrow period was. These questions can quickly reveal more about how the seller's own short sale will go.
Know the Close
Closing time is generally quick and easy. Buyers are usually getting the home at a discount, which means they don't have a lot of room to ask for contingencies. This is good for the seller because they won't usually be asked to fix the hot water heater or patch up the fencing before leaving the property. But there is at least one hurdle that sellers should know: buyers aren't allowed to lock-in interest rates when they first apply for their loan. So unless they're paying cash, they may be derailed during closing if the interest rate is much higher than originally expected.
Closing a short sale may seem daunting at first, but there are ways for sellers to get out from their investment without unnecessary hassle. Sellers can use these tips to get started so they can get more from their sale.