What Is Short Selling A House? What Does It Involve?
Even if you’re in good financial standing when you purchase your home and get a mortgage, that doesn’t mean things will stay great forever.
Unexpected things happen in life that causes financial hardship. That’s why an estimated 11 million families are at risk of losing their homes.
You can’t always stay where you are when that happens. The question is, do you want to wait for a foreclosure or get ahead of the process with a short sale?
So, what is short selling a house, and how do you go through the process? Check out the guide below to learn the answers.
What Is Short Selling A House?
Short sales happen when you’re upside down on your mortgage. You owe more than you have in home equity. As a result, you won’t be able to sell your home and make a profit.
These sales normally happen when the homeowner faces some kind of financial distress. It can be anything from high medical bills to a job loss. Life events happen and make paying the mortgage of a home untenable.
The good news is that your mortgage provider can help you in this situation. If you’re in a bad situation, you can work with your lender to go through the short sale process and sell your home for less than it’s worth.
The good thing about this is that your lender will forgive the remainder of your loan that you’re short. You can then find a better situation and start working on improving your finances.
However, there may be times when there is a profit with a short sale. But those profits will go to the lender in these situations.
What Is The Short Selling Process?
Now that you know more about a short sale, you need to understand the process you go through when taking part in one.
Keep reading to learn how to go through the short sale process.
1. Look for Help
The short selling process can be complex if you don’t know what you’re doing. You’ll need to fill out paperwork, deal with negotiations, and much more. It makes sense to look for help in this situation.
Try to find a real estate agent who has experience dealing with short sales. You won’t need to worry about making mistakes and delaying the process. That means you can sell your home quicker and get relief from the financial hardship you’re currently suffering.
2. File a Hardship Letter
You can’t decide to short sell your home on your own. You need to work together with your lender to go through this process. If you want to get them on board, you need to prove that you’re currently facing financial hardship.
Gather as much information as possible about your current financial standing. You’ll need your pay stubs, current debts, how much money you’re losing every month, and everything else relevant to your situation.
In many situations, a lender will go through this process if the situation you’re experiencing suddenly happens. A lender is less likely to agree to a short sale if the issue is longstanding and not disclosed.
3. Negotiate With Your Lender
You won’t negotiate with a home buyer when you list your home for a short sale. Your lender will work with you when you decide to accept or reject offers on your home. Because of that, you’ll need to work with your lender in all matters relating to your home’s sale.
You’ll look at the current homes on the market to figure out the fair market value. Once you have this number, you’ll list your property for sale on all the typical markets.
However, your lender may also have private buyers who look for short sales. If so, they’ll send a notification to those buyers to try and get a quick sale.
4. Find the Right Buyer
It’s not always easy to find a buyer for a short sale. The process of buying is more complex than a traditional deal. That leads many buyers to ignore short-sale properties and go for a normal market listing.
However, there are many people out there willing to buy short sales. One common reason buyers skip these types of properties is that they are often distressed properties. It will take time and money to rehab a home and make it livable again.
That’s where someone like a cash buyer will help. Cash buyers buy undervalued homes and fix them up for buyers that don’t want to buy a second job. There is a lot that cash buyers can offer, so make sure you check it out.
5. Receive Offers
The final step of the short sale process is to receive offers on your home. You’ll start getting bids coming in once you list your home on the market. Ideally, your real estate agent will be available to give tours of your home and take bids for you.
Once you find a bid that works for you, you’ll need to give it to your lender. You’ll work together to decide if a bid is worth accepting. Your lender will also look for the highest bid possible to recoup as much money as possible.
Once you and your lender agree to accept a bid, you’ll complete the selling process. You’ll complete all the final paperwork to hand over possession of your home.
Short Selling Is A Great Way to Sell a House
There isn’t always time to set up a real estate listing and wait for the perfect buyer to buy your home. Sometimes, you need to deal with unexpected issues and may need to offload your home to save money and avoid bigger problems.
Luckily, you have the option of short selling available to give you a way out. Now that you can answer the question, “what is short selling a house?” you have what you need to decide if it’s the right choice for you.
Check out the blog for more tips that will help you during a home sale.