Can I Short Sale My Home?

While people have heard the term "Short Sale" over and over again, we've discovered that many don't really understand what it means.   The term "Short Sale" began around 2007 at the beginning of the mortgage crisis. A short sale occurs when the lender agrees to permit the homeowner to sell their home for less than the remaining mortgage balance. In many cases, property owners have 2 mortgages on their home, requiring two different lenders to agree to a reduced payoff.   Here are some of the advantages of selling in a short sale:

  1. You have more control of your situation than if you allow your home to go into foreclosure. Once there is communication with the bank and the short sale is permitted, there is no lying awake at night wondering when the bank will kick you out.
  2. You will spare yourself the stigma and credit impact of a foreclosure.
  3. You are not required to be behind on payments 30 days to qualify.
  4. Short sales are permitted for divorce, loss of income, illness and additional circumstances.  Each bank handles short sales in their own way so there is a variety of permitted "extenuating circumstances" that are considered.
  5. Your home sale will be handled like any other sale.  You will be listed in the MLS (Multiple Listing Service) website and Realtors will show your home just like any other property that is for sale.  When an offer is received you will first agree to or negotiate a price you feel the bank will accept. Once a contract is signed between you and the buyer, it's forwarded to the bank along with additional supporting documents for the bank's approval.
  6. A properly handled short sale will likely be sold at a price that should be closer to market value and in nearly all cases, be better than a foreclosure, resulting in a lower deficiency. 

If I sell in a short sale when can I buy again?

Unlike foreclosure, a homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae-backed mortgage within 2 years. In contrast, a homeowner who loses a home to foreclosure is ineligible for a Fannie Mae-backed mortgage for a period of up to 7 years with some exceptions.

Our next blog will outline the varying lengths of time for when you may buy again after a short sale, foreclosure or bankruptcy.

The Watsons are active in local communities and have lived in the Northwest Suburbs for over 40 years. Their knowledge and experience will get you the results you want! ~ Jayne Smith, Palatine, IL