It is a scary situation when you find out that your home is worth less than the amount of money you owe to the bank. This is typically referred to as being “under water” in a home. No one plans for this to happen, but understanding what your choices are is an important step. If at all possible, homeowners should wait it out and hope that their home eventually goes up in value.

Another option is to try to rent out the home if there is a reason that a homeowner can no longer occupy the space. However, if those are not options, some homeowners might find themselves facing a foreclosure or a short sale. Going into foreclosure or selling a house as a short sale should always be a last resort. If you are in this position, understanding your options is vital.

What is a Short Sale?

Short sales are complex and can be confusing. In addition, contrary to its name, short sales are anything but short. Essentially, a short sale happens when a lender accepts less than what is owned on the property because the home is worth less than what is owed on the home.

Here are 5 important facts that will help you gain understanding of short sales:

  • When a homeowner is able to successfully negotiate and close a short sale, they will be qualified for a Fannie Mae backed mortgage after only two years. This is different from when a home goes into foreclosure. At that point, the homeowner actually loses their home and is not eligible for a Fannie Mae loan for another five years.
     
  • When you sell your home as a short sale, you are still able to occupy the home, unlike a foreclosure where you have to evacuate.

  • It will dramatically impact your credit score. A short sale is considered a serious delinquency and can hurt your credit score.
     
  • When you plan to sell your home as a short sale, you do not have to under price the home. It can actually jeopardize your short sale approval. A lender will still be looking for a sales price that is close to the market value.
     
  • While selling a home as a short sale is not the ideal circumstance that a homeowner wants, it can relieve a lot of stress to get out of a property.
     

Seek Out and Experienced Real Estate Agent

If you find that you are underwater with your mortgage, the first step to take is to talk to an experienced real estate agent that has experience with short sales. They will be able to walk you through the whole process and answer your questions.

Wrapping Up

When you find your home is valued less than what you owe and you need to get out of a mortgage, you might be facing a situation where you have to sell your home as a short sale. Having an experienced real estate agent to help you through the process is vital. In addition, understanding the process of a short sale will help you as you journey through.

If you have any questions about short sales, please give us a call. We’re here to help.

248-348-7200