Do You Owe More Than Your Home is Worth…But Still Needs to Sell? If you purchased your home in the last 10 years or refinanced your loan during that period – there is a good chance you owe more on the home that it would sell for today. According to Zillow.com: “Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth”.
The Housing and Economic Recovery Act of 2008 aims to provide some relief to Homeowners struggling to pay their monthly mortgage costs – with FHA backed refinancing for 90% or the homes current value (starting October 1st) – but what if you need to sell your home? Whether it be marriage, children, divorce, job transfer, etc. – there are many “life changing” events that require we sell our homes….regardless of the current market conditions. If you need to sell your home, but owe more than it is worth, you are in a Short Sale situation.
What is a Short Sale?
Short Sale, sometimes referred to as being “upside down”, simply means that a Homeowner owes more to their Lender than a home is likely to sell for. A homeowner, needs to get approval from their Lender to perform a Short Sale and will typically have to provide financial information supporting their request for the Lender to take a loss.
For a homeowner, a Short Sale is an alternative to foreclosure or filing for bankruptcy. If a Lender agrees to a Short Sale, they are agreeing to accept less than they are owed on a property. A Short Sale, on a primary residence, is usually a better alternative than foreclosure. For instance, based on the latest FHA-Fannie Mae-Freddie Mac guidelines, an individual can qualify again for a home loan 2 years after a Short Sale. Whereas, the guidelines call for 5 years to pass after a foreclosure and 7 years after a bankruptcy. In addition, the deficiency amount (or the amount of loss the Lender is going to accept) is currently deemed tax-free to the Homeowner on a primary residence…this was signed into law in 2007 but is scheduled to end in 2012.
In a Short Sale, the Lender (or Lenders if you have more than one loan on the property) pays for the costs of the sale (eg. real estate commissions and closing costs). In most cases the Homeowner is able to walk away free and clear…with no costs or expenses..
In some cases, there are significant tax and financial implications to a Short Sale. All homeowners considering a Short Sale should make sure they are aware of all the ramifications and consult with a tax and/or legal professionals.
If you are considering a Short Sale, I am here to help. A Short Sale requires a real estate agent with a professional approach and the ability and desire to negotiate directly with Lenders. Many real estate agents are not qualified and do not have the skills to assist with a Short Sale.
Please feel free to call or email for more information . Your inquiry will be completely confidential.