But what is a short sale, and is it the right route for you? We\u2019ve broken out the most common questions about short sales to help you make a more informed decision about your next steps.<\/p>\n
- \n
- What is a short sale?<\/a><\/li>\n
- How do I know if I qualify for a short sale?<\/a><\/li>\n
- Short sale vs. foreclosure: What’s the difference?<\/a><\/li>\n
- What documents do I need to apply for a short sale?<\/a><\/li>\n
- How is my home\u2019s current value determined during a short sale?<\/a><\/li>\n
- Who pays closing costs in a short sale?<\/a><\/li>\n
- How does a short sale affect my credit score?<\/a><\/li>\n
- What are the tax considerations of a short sale?<\/a><\/li>\n
- Can I hire any agent to handle my short sale?<\/a><\/li>\n
- What are the alternatives to a short sale?<\/a><\/li>\n
- \u00a0Is a short sale right for me?<\/a><\/li>\n<\/ol>\n
\n\n\n\n\n
\n\n\n![\"homelight](\"https:\/\/www.homelight.com\/blog\/wp-content\/themes\/ccprototypev5\/images\/logo-small-cta.png\")
\n <\/div>\n \n Find a Top Agent For Your Short Sale<\/h3>\n
HomeLight data shows that top-performing agents sell homes more quickly and for more money than average agents. To make the most of your short sale, connect with a top agent in your area.<\/p>\n \n
\n Find Agent<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n\u00a0<\/div><\/p>\n1. What is a short sale?<\/h2>\n
\u201cA short sale is a scenario where the mortgage company approves a loan payoff that is short of \u2014 or less than \u2014 the full loan balance,\u201d explains Misty Soldwisch<\/a>, an experienced short sale agent in Des Moines, Iowa.<\/p>\n
In a short sale, your mortgage lender agrees to let you sell your house for an amount that is less than what you owe and forgives any extra debt remaining after the house sells. This essentially means that they\u2019re giving you money for free, at least on paper.<\/p>\n
Note:<\/strong> This only works if your house is currently worth less than you owe on your mortgage.\u00a0
<\/div><\/em><\/p>\n2. How do I know if I qualify for a short sale?<\/h2>\n
You must be underwater on your mortgage in order to qualify for a short sale, which means that you have negative equity<\/a>.<\/p>\n
This can happen for a variety of reasons:<\/p>\n
- \n
- A real estate market<\/a> downturn lowered your home\u2019s value below the amount you borrowed to purchase it<\/li>\n
- The debt from a second mortgage or a home equity line of credit<\/a> (HELOC), combined with your primary loan, now totals more than the house is worth<\/li>\n
- Missed mortgage payments, delinquency fees, interest charges that added up<\/li>\n<\/ul>\n
Negative equity isn\u2019t the only criteria you need to meet in order to qualify for a short sale, though.<\/p>\n
\u201cIn order for a mortgage company to consider a short sale, the property needs to be in imminent risk of foreclosure. Lenders will not consider a short sale if there is no foreclosure pending,\u201d says Soldwisch.<\/p>\n
\u201cThe borrowers must also be able to demonstrate a distressed financial situation. The mortgage company will look for hardship factors like divorce, the loss of a job \u2014 which is a loss of income \u2014 or devaluation of the home, meaning that the house is currently worth less than the borrowers paid for it, putting them underwater on the property.\u201d<\/p><\/blockquote>\n
Bottom line:<\/strong> If you\u2019re underwater on your mortgage, if you\u2019ve received pending foreclosure notices<\/a>, and you can demonstrate financial distress, you may qualify for a short sale \u2014 as long as your lender agrees.
<\/div><\/p>\n3. Short sale vs. foreclosure: What’s the difference?<\/h2>\n
Short sales and foreclosures are often lumped together because both are rock-bottom options for homeowners who are behind on their mortgage payments and in financial hot water.<\/p>\n
They aren\u2019t the same, though.<\/p>\n
When you\u2019ve reached the foreclosure stage, the bank has taken the house from you because you\u2019ve defaulted on your mortgage<\/a>. In that scenario, your lender cuts their losses and will move to evict you. When your house eventually sells, the bank is the one selling it \u2014 you are no longer involved.<\/p>\n
However, letting your lender foreclose on your house doesn\u2019t necessarily mean you\u2019re freed from your mortgage debt. Depending on where you live, your lender can sue you to recoup some of what you owe.<\/p>\n
None of this happens with a short sale. When you arrange for a short sale, your lender is agreeing to forgive any extra debt after the house is sold for less than you owe. With a short sale, you\u2019re also the one in the driver\u2019s seat during the sale of the house.<\/p>\n
\u201cWith a short sale, negotiations are between the homeowner and the purchaser, not the mortgage company,\u201d explains Soldwisch.<\/p>\n
\u201cThe terms are subject to approval by the mortgage company, but the seller is still very much in control of determining the price<\/a>, the terms, the closing date<\/a>, and so on.\u201d<\/p>\n
Here\u2019s a side-by-side comparison to help you quickly understand the key differences between a short sale and foreclosure:<\/p>\n
- The debt from a second mortgage or a home equity line of credit<\/a> (HELOC), combined with your primary loan, now totals more than the house is worth<\/li>\n
- How do I know if I qualify for a short sale?<\/a><\/li>\n