When you are in a dire financial situation and are upside down in your mortgage, a short sale can help you quickly sell your house. However, what is a short sale in real estate?
Many homeowners who are trying to sell their home fast wonder what is a short sale in real estate. This can also be referred to as a quick sale. A short sale is a process of selling your house for less than what you owe on it and negotiating the reduced sale with your mortgage company. It often involves working with a real estate agent and a lawyer who both have experience in working on short sales.
What is a Short Sale in Real Estate?
A short sale is used when you owe more on your house than it is worth, or more than you can reasonably expect to sell it for in a reasonable amount of time. A short sale typically should only be used if you are upside down in the mortgage and are unable to continue to make your mortgage payments. In this situation, a quick sale can be a good option. It requires more than just selling your house, however. You must also hire a lawyer to negotiate the lower sale price with your mortgage company or companies if you have a second mortgage. There are two main steps to a short sale, the sale and the mortgage negotiation.
Sell Your House
The first step to a short sale is to sell your house. With a quick sale, you price the property lower in order to attract buyers faster. Generally, the house is priced 75 to 85 percent of the market value. It helps to have a real estate agent who is experienced with short sales in order to properly price and market the property to sell fast.
Negotiate With Your Lender
The tricky part of the short sale comes after an offer is made on your home. Once you have an offer you must then negotiate with your lender or lenders to accept the lower sales price. It is best to obtain the services of a lawyer experienced in short sales. You can also attempt to negotiate that the mortgage company cannot come after your finances in the future for the loss they incur. You can also attempt to get the company not to put the short sale on your credit history. None of this, however, is a guarantee. It is in the mortgage company's best interest to negotiate a short sale to keep from having the mortgage default and then having to foreclose and auction off the property. The money earned from a short sale is still typically better than what can be earned by auction.
A common question when going through a short sale in real estate is whether or not to continue making mortgage payments. It is always best to make your mortgage payments as long as you are able to. By not making payments for over 30 days you will do further damage to your credit and risk being foreclosed on by the bank. However, you must prioritize your money, and basic necessities like food should come before paying the bank. This is an important, personal question that you should answer for yourself, and potentially with the help of a lawyer or certified public accountant.