Are you behind your mortgage payment? Do you think you’ll be behind your mortgage payments sometime soon? Are you indebted more than your house’s worth in today’s Texas real estate market?
You might be eligible for short sale.
This year, Texas like other major states has seen a lot of changes in mortgage interest rates, employment, housing affordability and housing prices. That’s why; many homeowners found themselves in a difficult situation where they weren’t able to make their regular monthly mortgage payments. In other situations, a homeowner might have to sell their home in a hurry because they got a new job out of state etc. All of this can lead them towards short sales. But it is important to note that there is a difference between short sales and foreclosure.
What is a Short Sale?
Short sale is a condition where the homeowner is late on his regular mortgage payments and knows that the selling price of the home would be lesser than the sum of mortgage payment and closing costs. Let’s take the example of a man who is unable to pay his regular monthly payments and has no option but to sell his home. He owes $250,000 on his mortgage but the selling price is only $150,000 because of the deteriorating market condition. There is a huge difference of $100,000 and he is unable to meet that difference. This difference is known as deficiency balance. In that situation, he might have to go through short sale after consulting his lender where both the parties sign an agreement.
In order to get the deficiency balance, the lender (usually a bank) might choose to do one of the following things:
- Give you a waiver of deficiency, which means that they will choose to forgive the balance
- They can pursue a deficiency judgment or collection on the remaining balance
- They might ask you to pay through unsecured or promissory note, which is kind of a loan and the lender might ask you to continue the payment without any collateral
- Some states like California gives homeowner a right (SB458 law) to get the waiver of deficiency once the lender accepts short sale. Texas doesn’t have any such law, so the homeowner will have to negotiate with them.
How does it work?
Short sale is very different from a regular sale and the homeowner might have to hire the services of a short sale expert. The first step is to contact your lender and discuss the situation with them. A lot of homeowners try to run away from the lenders and this might create major issues. It is extremely important that you keep in touch with your mortgage advisor to make sure you both are on the same page.
Short sale process needs to be managed by an expert since the beginning. Otherwise, there is a chance that you might go into foreclosure. You need to understand that it’s not your regular real estate transaction where you can switch agents if you don’t like them. The time keeps ticking once you are late on your payments. Everything needs to be planned and managed from the start.
Short Sale 101
1. Hiring a short sale Expert
Once you know that you might be getting into short sale, the first thing you need to do is to hire a Texas short sale expert. Do your research, ask for referrals and talk to different agents. Once you start working with an expert, he/she will help you to:
- Come up with an appropriate listing price after conducting comparative market analysis (CMA)
- Promote your property as a short sale on MLS
- Make the communication between you and your lender easier
- Negotiate the deal with prospective buyers
2. Preparing the documentation
As a homeowner, you will need following documents:
- Hardship letter: It should have all the details of why you aren’t able to make the mortgage payments, your financial condition and why you are opting for short sales
- A letter of evidence with the details of your earnings and assets
- Federal income tax returns copies for the last two years
Patience is an integral part of short sale. It’s a long and tedious process and you need to be prepared for that. Usually, it takes longer than the seller have expected. Lenders also have a big hand in the short sale process. They will take their own sweet time to inspect the property and make a final call.
If you are in need of a short sale expert, please fill in the form below: