How does a short sale work?

If you are unable to make your payments and your house is worth less than your loan amount plus about 8% for closing costs, you make qualify for a short sale. The owner of your mortgage actually accepts a lower amount than is owed for the mortgage. Sometimes this amount will be written off entirely and other times a repayment of a portion of the deficeincy is required in a new loan. You may have a tax liability for the portion that is written off entirely.

I am not sure if you are considering buying or selling a short sale, but as a SFR designated (short sale and foreclosure resource) Realtor, I will try and answer this from both sides...

As a seller:
Your first option is to speak with your lender about the HAMP (Home Affordable Modification Program) which may help you keep your home after a mortgage restructure which will reduce your monthly payments. If you don't want to keep your home or if you have already tried a restructure and it didn't work, than a short sale may be your best option. First, you need to contact your lender and get their requirements on where you need to start- which is typically an information packet. Be prepared to disclose all of your financial information and be able to prove a hardship.

Once you have lender approval, or even before you do, I would reach out to a SFR designated Realtor. You can find a designated agent in your area on www.Realtor.com. Your agent can help you navigate the delays and head aches that can occur along the way and help you price and market your home correctly. Be prepared for a long process that can be frustrating at times.

If you are considering buying a short sale the primary thing you need to know is that it is not a short process. If you need to move by a certain date, a short sale might not be for you. If you are not time bound, a short sale can be a good way to buy a home at a good price.

I hope this helps!

Please give me a thumbs up if you find this information useful.

In Texas, a short sale must be approved by your bank before you can get started...

Step 1. Talk to the Bank
Step 2. Talk to a Realtor (ME)
Step 3. Get your House Listed and priced to sell
Step 4. Submit offers to the Bank
Step 5. Get ready to move

In order to be considered for a short sale, you need to demonstrate financial hardship by providing appropriate financial documentation to your lender. In addition, the value of the home must be less than the amount owed. The lender will not approve a short sale if he can recoup the mortgage with a regular sale.