Short Sales Explained
If you want to sell your house but it is worth less than the amount remaining on the mortgage, a short sale may allow you to sell your house and settle your mortgage debt.
By completing a short sale rather than allowing your house to go through foreclosure, you avoid eviction and your house will not be sold at a public sale or auction. Plus, depending on your circumstances, you could qualify for financial assistance to help with relocation costs.
In the past, it was rare for a bank or lender to accept a short sale. Today, however, due to overwhelming market changes, banks and lenders have become much more negotiable when it comes to these transactions. Changes in corporate policy government administration have also improved the chances of getting a short sale approved
Today’s economic environment is very stressful. Many Washington residents are dealing with multiple stresses. For homeowners to qualify for a short sale, they must prove a hardship which could include
- Financial Hardship
- Loss of employment.
- Reduction of income
- Changes in mortgage payment
- Illness in Family/ Caring for an elderly parent
- Illness of Borrower
- Death in Family
- Other life-changing events
- Divorce / Marital difficulties
- Sudden disability
- Relocation in job
- Loss of Renters / Tenants
- Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.
- These events can affect a borrower’s ability to make mortgage payments on time. When this happens, many homeowners, rather than go through foreclosure, want to sell their home but owe more on their home than the home is worth.
A short sale is a real estate transaction in which the sales price is insufficient to pay the debts and obligations encumbering the property along with the costs of sale, AND the seller is unable to pay the difference
- Every short sale is dependent upon the seller’s lender(s) consenting to the transaction and agreeing to release the lender’s security interest in exchange for less than what is owed. In some cases however, the lender’s approval of a short sale does not necessarily mean the lender relieves the seller of liability for repayment of the entire debt
- A short sale is a very complex transaction that involves numerous issues as well as legal and financial risks. All sellers are advised to seek the advice of a lawyer and tax professional before proceeding with a short sale.
Simply “Walking Away” from the property through foreclosure also does not necessarily relieve a seller of these debts as while Washington State is a “non-deficiency” state that only pertains to the foreclosing party. A homeowner could lose their property to foreclosure generally to the 1st mortgage lien holder and still owe the balance(s) from the 2nd mortgage or other lien holders
If you have questions or feel you may qualify for a short sale, please contact me at 425-750-2393 for a free consultation. Understanding your options now could mean all the difference in the world
