By Pamela Pariso
Keller Williams Realty, Southern Tier & Finger Lakes
If you’re behind on your mortgage payments and facing the possibility of foreclosure, the situation can feel overwhelming. However, you can take steps to avoid losing your home to the bank. One of the most viable options is a short sale. With the lender’s approval, this process allows you to sell your home for less than what you owe on your mortgage. Here’s a practical guide on what to do:
1. Communicate with Your Lender Immediately
- Explain Your Situation: As soon as you realize you’re falling behind on payments, contact your lender. Most lenders want to work out a solution rather than go through the costly and time-consuming foreclosure process.
- Ask About Alternatives: Your lender might offer temporary solutions like a loan modification, forbearance, or a repayment plan to help you catch up on missed payments.
2. Understand the Short Sale Process
- What Is a Short Sale? A short sale occurs when you sell your home for less than the outstanding mortgage balance. The lender agrees to accept the proceeds as full payment of the debt, preventing foreclosure.
- Eligibility Requirements: To qualify, you generally need to prove financial hardship, owe more on your mortgage than the home’s current market value, and have a buyer lined up.
3. Gather Required Documentation
- Financial Hardship Letter: Prepare a letter explaining why you can’t continue making payments. Be honest and detailed about your financial struggles.
- Financial Records: Your lender will likely ask for bank statements, tax returns, pay stubs, and a list of monthly expenses to assess your situation.
- Property Valuation: Obtain a Comparative Market Analysis (CMA) or an appraisal to show the current value of your home.
4. Call a Real Estate Agent Experienced in Short Sales
- Expertise Matters: Short sales are complex, so it’s essential to work with a real estate agent who has experience handling them. They can help with negotiations, paperwork, and liaising with the lender.
- Market Your Home: Your agent will list your home at a competitive price to attract buyers quickly. The sooner you find a buyer, the better your chances of avoiding foreclosure.
5. Negotiate with the Lender
- Submit an Offer: Once you receive an offer from a buyer, submit it to the lender for approval. Be prepared for some back-and-forth as the lender may counter the offer.
- Get Everything in Writing: Ensure that all agreements, including the lender’s acceptance of the short sale, are documented in writing.
6. Understand the Consequences
- Impact on Credit: A short sale will negatively affect your credit, but it’s generally less damaging than a foreclosure. You may be eligible to buy another home in a few years, depending on the circumstances.
- Possible Tax Implications: Consult with a tax advisor, as the forgiven debt in a short sale could be considered taxable income.
Final Thoughts
While facing the possibility of losing your home is undoubtedly stressful, a short sale could be your way out of a difficult situation, but every case is different. If you live in the geographical area I serve, Elmira-Corning-Watkins Glen, NY, call me for a personal and confidential consultation. My number is 607-742-1350.