Short Sales and Alternatives

A short sale involves selling your home for less than the total amount owed on your mortgage. This option is often pursued by homeowners facing financial hardship who are unable to pay the difference themselves. While a short sale negatively impacts your credit, the effect is typically less severe than a foreclosure. Additionally, under current Fannie Mae regulations, a short sale may allow you to qualify for a new home loan in as little as two years, compared to the seven-year waiting period after a foreclosure.

To successfully complete a short sale, you must:

1. Qualify based on financial hardship.
2. Find a qualified buyer.
3. Obtain approval from your lender(s) to accept the reduced sale amount.

When to Consider a Short Sale

A short sale may be right for you if you meet all of the following conditions:

• You are experiencing a significant hardship, such as job loss, divorce, medical emergency, or relocation over 75 miles away.
• You owe more on your mortgage than your home is worth.
• You cannot afford your current mortgage payments.
• You are unable to modify your existing home loan or pursue alternatives to foreclosure.

Key Considerations

1. Impact on Credit
   A short sale will lower your credit score, but the impact is generally less severe than foreclosure. This can help you recover more quickly and potentially qualify for future loans sooner.

2. Tax Implications
   Forgiven debt in a short sale may be considered taxable income. Consult a tax professional to understand your specific situation.

3. No Proceeds from Sale
   Since the sale price is less than your mortgage balance, you will not receive any proceeds. Additionally, approval is required from all lenders holding liens on the property, including secondary loans or lines of credit.

4. Lender Cooperation
   The short sale process can be time-consuming and complex. Lenders must review and approve your short sale package, which includes financial documentation, proof of hardship, and details of the proposed sale.

Alternatives to Short Sales

Before committing to a short sale, explore other options, such as:

• Loan modifications to adjust your mortgage terms.
• Refinancing, if you qualify.
• Renting your home to cover mortgage payments.
• Deed in lieu of foreclosure, where you transfer ownership to the lender to avoid foreclosure proceedings.

Steps to Start a Short Sale

If you believe a short sale is your best option, here’s how to get started:

1. Evaluate Your Financial Situation
   Work with a short sale specialist to assess your hardship, assets, and income to determine eligibility.
2. Determine Your Home’s Market Value
   Understand the current value of your home and the costs of selling.
3. Prepare a Short Sale Package
   Submit necessary documentation, including proof of hardship, income statements, and a letter of explanation, to your lender.
4. Market Your Home
   Collaborate with a real estate agent experienced in short sales to attract qualified buyers.
5. Negotiate with Your Lender
   Work with your lender to address potential deficiency judgments and tax consequences.

Contact a Short Sale Specialist

Navigating the short sale process can be overwhelming. If you're considering a short sale or believe foreclosure is your only option, contact us at 910-650-9887. Our team will help you:

• Explore all available options to avoid foreclosure.
• Manage the short sale process from start to finish.
• Work with lenders to secure approvals and minimize financial consequences.