How do you sell your home if you owe more than it is worth in Beaverton, Oregon? Well, there are two ways. The first is to hold on to the property until the market rebounds or you can sell it on a short sale. A short sale, in basic terms, means the bank takes it in the shorts! (It certainly has nothing to do with the amount of time it will take for you to sell your home.) You sell the property and they take the loss, but this usually is only acceptable to the bank if you can prove a hardship. If I were you, and you aren’t in a hardship situation, I suggest you do the first, hold on to the property until the market rebounds.
Here
is the reason why. If you can survive this downturn in the market and
hold
on to your property, you won’t take the hit to your credit
that a short
sale
can cause. (See your CPA for more advice on how it can affect you and
your long
term financial goals.)
You see, if you sell your
home on a short
sale, you will not be able to
purchase anything for approximately two years, or more,
depending on
how bad
the hit to your credit was with other bills you may have been late on.
(But,
the time is usually about two years.) During those two years, you will
usually
have to be renting and you will pay more because of the ding on your
credit.
If you aren’t behind on
your payments yet, but could be because of a
job loss,
call your lender and try to get a loan modification and
get the
payments reduced
until you can find a new job. But, if you have to move and you have to
sell,
then I still suggest you call your bank and advise them of what is
happening,
it will make things a lot easier when it comes to the sale of your home.
Now,
if you have to sell and you can prove a hardship, then you are
certainly a
candidate for a short
sale. (It certainly is better for you than a
foreclosure
– Once again, you’ll need to talk to your CPA.) Now there are a series
of
things you are going to need to do to prepare yourself and your home
for a
short sale. Unfortunately, it isn’t going to be an easy process, but
when it is
all said and done, a great burden will be lifted off your shoulders.
One of the first things
you are going to need to do is sit down and
talk to an
agent who is qualified in selling
short sales. This is a very complex
real
estate transaction, and if done wrong, it can have significant tax and
legal
ramifications. A short sale expert will sit down with you, give you a
short
sale packet, and go over the entire process from beginning to end. Once
again,
make sure you call your CPA and lawyer before you ever sign a single
document.
(A real estate agent is not qualified to give legal or financial
advice, so
they should have you call your CPA and lawyer first.)
After that has been done,
they will have you sign what is called a
Letter of
Authorization. This letter will spell out what your agent
and their
representatives can or can’t do on your behalf with your bank. It
usually says
they can negotiate the sale of your home on your behalf and can have
access to
all financials pertaining to the sale of your home. But, it does limit
what
they can do when it comes to a loan modification on your behalf, unless
that is
something you want done.
The
next step is the hard
one! You will need to write a hardship letter to your bank explaining
why you
need to do a short
sale, why you can’t continue to pay on your current
mortgage,
and why you need to move on. Then you will need to gather all of your
financial
information to submit to the bank, including your last two pay stubs,
last two
months worth of bank statements, tax returns for the past two years,
and all
your bills (Credit cards, car payments, electric, gas,
water…everything). The
bank basically needs to know why you are considering a short sale and
then the
proof that your total income is not enough to pay all your bills.
(Especially
your mortgage.) They would rather see you stay in the home and pay than
take
the home back in foreclosure or take a huge loss on a short sale. This
is just
a warning to you, they maybe calling a lot for more verification on
your bills
and your income.
The next thing they are
going to need from you is the CMA (Comparative
Market
Analysis) to show the current value of your home. This is
where your
agent
comes in. They will supply you with this. Even after an offer has been
submitted on your home, they will still send another agent out to do
what is
called a BPO (Brokers Price Opinion), and then, if that is
satisfactory, and
everything else is satisfactory, they will send out an appraiser. (See
how long
this process is already taking?)
Todd Clark - Broker / Sales Coach
Palazzo Realty Group
Phone: (503)524-9494
Fax: (503)622-8739
©2009 Todd Clark - Beaverton Oregon Real Estate: How do I sell my home if it worth less than I owe (Short Sale Advice)
Seems like you have covered all the basics thanks for sharing.
TC,
Short means different things to different people, doesn't it...!!! Thanks, Fran
Todd, great overview of the two options to being upside down.
Wow!
A voice of reason among a chorus of greed!
This isn't going to make you popular with the commonest amongst us. Nor with the politicians trying to buy votes with other peoples money.
Lennon beleaved in taking some peoples money, he said for the benefit of those in need, only his need for money and power were the only winners. Currently we've improved the idea, we've personified corporations and labeled them evil! The problem is corporations are simply groups of people, management and investors. The individual people might be evil, but the corporation is like a gun! Guns and corporations are capable of great good or tremendous evil depending on who's in control. There's little difference between defaulting on the bank or stealing from family and friends, except that you don't know the faces of the stock-holders and more recently the tax payers who suffer.
Great blog, Todd.
Bill
Todd
These are trying times; I hate to see people suffer like some are at the present time. Best to you, and all my best.
Very detailed post Todd! The term "short sale" has quickly become a known phrase and perhaps new vocabulary words on the general public. But few ordinary people really know the meaning, how it works and much less the pros and cons behind it.
Martin L.
Todd as you know in our state that may not be possible to wait, prices are almost to where they were 15 years ago.
The learning curve for the sellers can be painful and they do need someone who has been successfulin the past. Don't be afraid to ask your agent if they have successfully completed a short sale.
It amazes me how many people are only short on their home a few thousand dollars are willing to take a hit to their credit and lose their home. Where if they were to hold on to it if they can their equity would return and they could be well ahead of the game. There are many times selling the home and taking the hit are well worth it, but you need to seek legal and financial advice before making that leap.