Short sale is a term used by mortgage lenders who agree to accept a discounted payoff on mortgage loans. A short sale agreement is sometimes offered to homeowners who have defaulted on their mortgage and facing foreclosure. This type of real estate transaction allows the borrower to sell their home for less than is owed on their note and walk away from the property without causing extensive damage to their credit history.
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Not all lenders accept short sale offers and those that do generally have their own set of procedures. Typically, this option is only offered after all other options to save the home have been exhausted. Additionally, the borrower must meet certain eligibility requirements to qualify for a short sale. These include:
1) The borrower must be able to show proof through comparable home sales that their home is currently worth less than the unpaid balance.
2) The mortgage is in default or near default. In the past, homeowners had to be in default by three or more months to qualify for a short sale. Today, some lenders are allowing homeowners this option if the borrower is in distress and heading toward foreclosure.
3) The homeowner must prove they are in financial distress. This is accomplished by submitting a short sale hardship letter which explains why the homeowner can no longer make their mortgage payments. Hardships include life-changing events such as extended unemployment, chronic or emergency health problems, bankruptcy, death and divorce.
4) The homeowner has no assets they can draw from to maintain mortgage payments.
There are two types of short sale agreements -- 'deficiency judgment' and 'payment in full without pursuit of any deficiency judgment'. The first requires the homeowner to pay the difference between the short sale and original amount. For instance, if the mortgage note balance is $150,000 and the short sale price is $125,000, the seller would be responsible for paying the remaining $25,000 to the lender.
If the seller is unable to promptly pay the difference, a judgment is issued for the amount due. This judgment is reported to credit bureaus and will remain on the homeowner's credit report for 7 to 10 years; even once it is paid in full. Additionally, the deficiency amount may be subject to income tax.
Payment in full without pursuit of deficiency judgment, also known as Deed in Lieu of Foreclosure, allows the homeowner to return the house to the lender and be clear of debt on the home. Whenever possible, homeowners facing foreclosure should negotiate with their lender to obtain this type of short sale agreement.
Experts recommend working with a professional Realtor or private investor who specializes in short sale transactions. An experienced agent can help expedite the transaction and protect the seller's interests.
Although short sales do not allow homeowners to retain ownership of their home, they are an excellent option that can help individuals retain their integrity and avoid the agonizing heartache of foreclosure.
One of the problems you might encounter when selling your house yourself without an agent is not being able to find a buyer. This can cause all sorts of problems like having to make your payments on the house... which is even worse if the house is vacant. Another problem if the house isn't selling is you might not be able to move to a house you wanted to till the current one is sold.
Of all the reasons a house might not sell when selling it yourself, there are 2 that make up the majority of issues that will prevent you from finding a buyer.
1. The Price
If you price your house too high about market ranges, you'll find yourself with a limited supply of buyers who will pay over market rate. This is even more important in a regular to slow market. Sometimes during really hot, bubble markets, it is possible to get a higher price from the "buying frenzy," but generally those periods are far and few. For the majority of time you'll be in a normal to slow market where you'll need to be competitive to attract buyers in that economy.
Now if you don't know how to price your property to sell quickly, here's an easy way to figure it out. Go to online real estate sites such as Realtor.com or Zillow.com and find 3 to 5 houses in your neighborhood that sold in the last 6 months. For each sale, take the sales price (not the listing price) and divide it by the square footing to get price per square foot. Take the 3 to 5 price per square foot number and add them together, then divide them by the number of properties you used to get the average price per square foot. Then take this average number and multiply it to your square footage and get a round price. Take this price and multiply it by 0.98 and this should get you a pretty accurate price on what your house will sell for. Now if you have some big upgrades or additions, or your house isn't similar to the ones sell my house fast las vegas in your neighborhood, you're going to have to adjust for this. Otherwise, this simple formula will get you close to the price you need to be at for a quick sale.
2. Marketing
The second most important aspect in selling your house by owner is doing aggressive marketing. Now if you listed with an agent, and they were on top of their game, you wouldn't have to worry about it. However, if you are handling the sale by yourself, then you will have to get your property information out there... and in a compelling way. Meaning, you need to focus on the benefits of why buyers would be better off buying your house rather than the all the other properties on the market. Most folks just put out an ad in the their local paper's classifieds (which don't draw nearly the attention they used to) or just put up a few pictures and a description on Craigslist and expect their phone to be ringing off the hook. The reality, however, is much more different.
Of all the ways you can market your house, including listing it online in different housing sites, nothing beats signs. Pound-for-pound, signs will get you the biggest exposure of qualified buyers. The key is do them right. This means hand drawn, ugly signs put up on busy intersections using the right words that get buyers to pick up the phone and call you. Also, having a hand written sign, preferably on bright colors, in your front lawn will get you a nice volume of interest from eager buyers.
There is one other factor, though not well-known about, that can get your house sold fast for full market price... even higher sometimes. And that is selling with a lease option (also known as a rent-to-own). This is simply giving a qualified tenant/buyer 12 to 24 months to qualify for a mortgage. As you know, mortgage standards have gotten extremely tough these days. And many good folks, who have the income and are qualified, just get approved yet. You simply provide them a lease term to get their financing in place so they can close you out for cash when their loan goes through. Selling rent-to-own like this is also good since you net full market price, as you don't pay any commissions or fees when they cash you out.