{"id":23575,"date":"2021-04-30T11:17:12","date_gmt":"2021-04-30T18:17:12","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=23575"},"modified":"2024-11-26T08:54:48","modified_gmt":"2024-11-26T16:54:48","slug":"buyer-can-i-short-sell-my-house-and-buy-another","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-can-i-short-sell-my-house-and-buy-another\/","title":{"rendered":"Can I Short Sell My House And Buy Another? A Homeowner\u2019s Guide"},"content":{"rendered":"

While many homebuyers purchase with the foreseeable future in mind, it\u2019s safe to say that few people buy a house with the expectation of one day facing foreclosure<\/a>. But life can take unpredictable turns, and whether the intention for living in a home spans a few years or several decades, no one anticipates finding themselves underwater on their mortgage.<\/p>\n

Sometimes, missed mortgage payments can be remedied with a phone call and a bit of paperwork. Between forbearance<\/a> programs and loan modification options, if you\u2019re behind on payments by just a couple of months and only need a moment to breathe before your financial situation improves, it\u2019s often possible to find a solution that will allow you to keep your home by talking with your lender \u2014 especially if there\u2019s equity in the property.<\/p>\n

If things are more urgent, such as when a public notice of default has been issued and you\u2019re now in preforeclosure<\/a>, or if the amount owed on your mortgage exceeds what the home is worth, it doesn\u2019t take long to feel backed into a corner. Though options may be limited when you\u2019re upside down on your home, getting the lender to agree to a short sale<\/a> can bring much-needed relief.<\/p>\n

As for where you\u2019ll go next? Well, that depends, but if you\u2019re wondering if it\u2019s possible to short-sell your house and buy another, you\u2019re not the first to consider this quandary.<\/p>\n

While it\u2019s not impossible, it\u2019s also not as simple as hopping from one closing table to the next. With the help of Jennifer Seeno Tucker<\/a>, a top real estate agent in Elmont<\/a>, New York, we\u2019ll break down exactly what a short sale is and how this option impacts your ability to buy your next home.<\/p>\n

\"An<\/a>
Source: (Yena Kwon \/ Unsplash)<\/figcaption><\/figure>\n

What is a short sale?<\/h2>\n

You may already be familiar with the concept, but to recap, a short sale is when the lender agrees to the sale of a home for less than what is owed on the mortgage.<\/p>\n

In these cases, there is typically little to no equity<\/a> in the house, or you may even owe more than it is worth, and recouping losses would be difficult either due to the condition of the home, the current goings-on in the local real estate market, or some combination of both.<\/p>\n

If a homeowner is in a situation where discussion of a short sale is on the table, foreclosure is a real threat. Being able to sell the house and walk away without owing anything further is often a big relief.<\/p>\n

Short-sale transactions function mostly like a regular deal, though they can invite delays as the lender has to be involved, which leads to more back-and-forth between parties.<\/p>\n

How does a short sale affect credit history?<\/h2>\n

According to both Equifax <\/a>and Experian<\/a>, short sales can do nearly the same damage to your credit report as a foreclosure. Though the lender will have agreed to a compromise on the sales price, the transaction will likely still be reported as either \u201csettled\u201d or \u201cnot paid as agreed.\u201d Both line items mean that, in the eyes of the national credit bureaus, you ultimately did not uphold your end of the deal after signing your mortgage documents.<\/p>\n

While major marks on your credit report can stay there for seven years, your credit isn\u2019t necessarily decimated following a short sale. If your accounts are otherwise in good standing (and you continue to keep them that way), you may have a shot at another mortgage after just two years.<\/p>\n

Credit score algorithms place more emphasis on what has happened during the past 24 months, so it\u2019s possible that a lender will be willing to chat after the dust has settled.<\/p>\n

What if you can\u2019t make your mortgage payments?<\/h2>\n

Financial strain can arise through any number of circumstances. Whether due to job loss, a family emergency, medical issues, or some other unforeseen happenstance, few things are more stressful than realizing you won\u2019t be able to make your mortgage payment<\/a>.<\/p>\n

If this happens, there are a few people you should have on your contact list.<\/p>\n

Talk to your lender<\/h3>\n

Your first step should always be to contact your lender as soon as possible and explain the situation. Even if you only anticipate a month or two of problematic payments, it\u2019s always in your best interest to be transparent and see if there\u2019s any leeway for a late payment without penalty, a change in the date that your payments are due each month, or some other relatively minor but relief-offering solution.<\/p>\n

Under the COVID-19<\/a> pandemic relief legislation, you may be eligible for temporary forbearance<\/a>, which could impact part of or all of your payments. Just keep in mind that forbearance is not a payment forgiveness program; it only serves as a pause on having to make payments. You\u2019re still ultimately on the hook for the full balance of the mortgage. At the time of this writing, coronavirus forbearance will be active through June 31, 2021.<\/p>\n

If you are worried it may be more than a month or two, it\u2019s also worth speaking to your lender to discuss options for loan modification or if to see if you might qualify for refinancing<\/a>. Many homes have increased in value over the past year, and interest rates<\/a> have been remarkably low. Depending on your situation, you may be able to refinance your home and not only keep it, but also save money in the process.<\/p>\n

Keep in mind, though, that in order to refinance, you\u2019ll still have to qualify for a home loan. So if your income and credit score aren\u2019t in great shape, this option is unlikely. Likewise, if you\u2019ve missed mortgage payments without a forbearance plan put into place, you\u2019re unlikely to qualify for a refinance.<\/p>\n

That\u2019s why talking to your lender is so important. Even if you can\u2019t refinance, they may be willing to provide you some form of loan modification that will allow you to stay in your home until you can get back on track.<\/p>\n

You will also have to negotiate with your lender anyway if you are considering the possibilities of a short sale, so starting that conversation and discussing what options are available to you is something best done sooner than later.<\/p>\n

Talk to a real estate agent<\/h3>\n

If your situation is such that forbearance or refinancing are implausible solutions, it\u2019s time to contact an expert<\/a>.<\/p>\n

An agent can help you determine the market value of your home as a first step toward deciding what to do next \u2014 and this could bring about some much-needed good news.<\/p>\n

\u201cIf you\u2019ve been keeping up [with payments] until COVID-19, there may be an opportunity,\u201d says Tucker.<\/p>\n

\u201cIn my local market, we\u2019ve seen an almost 6% rise in home prices, and that can be the difference in a homeowner walking away with tens of thousands of dollars instead of walking away with nothing. In this market, people may not realize they have equity in their home.\u201d<\/p><\/blockquote>\n

An experienced agent will be able to share the latest information on what\u2019s happening in the neighborhood and how your home is likely to fit into current trends<\/a>. When you\u2019re facing the possibility of a short sale, it\u2019s important to gather as much knowledge as possible.<\/p>\n

Talk to a financial advisor<\/h3>\n

In the spirit of gathering information, it can\u2019t hurt to speak with a financial advisor to discuss your options from multiple angles. Especially if you have savings, bonds, or investments that can possibly be tapped to bring your mortgage back up to speed, it\u2019s worth exploring all avenues with a financial professional.<\/p>\n

Further, you should understand that your mortgage lender may not approve a short sale if you technically have funds available elsewhere. Short sales aren\u2019t meant to be a get-out-of-jail-free card, so you\u2019ll need to submit a hardship letter and be able to prove that your income and assets are not sufficient to satisfy your mortgage. A financial advisor can help you suss out your net worth and put together key details.<\/p>\n

\"An<\/a>
Source: (Juan Ignacio Escobar Tosi \/ Unsplash)<\/figcaption><\/figure>\n

Approach a short sale as a last resort<\/h2>\n

Once you\u2019ve reached out to everyone who can offer advice or potential solutions, the reality may be that a short sale is, in fact, your best option.<\/p>\n

In a true short sale, you won\u2019t make a profit on the sale of the home; all proceeds will go to the lender. This is why it\u2019s so important to tap the expertise of a real estate agent first, because a hot seller\u2019s market<\/a> could mean there\u2019s demand for your home that you didn\u2019t even realize and knowing your home’s approximate value also puts you in a strong position if you need to go to your lender to discuss the possibility of a short sale.<\/p>\n

So, you sold your home in a short sale. Can you buy again now?<\/h2>\n

As noted earlier, if your lender reported the short sale as anything other than \u201cpaid in full,\u201d your credit history now carries a metaphorical red flag for at least two years.<\/p>\n

How the short sale will be reported is something you can try to discuss with the lender as the process is happening, but even if your specific representative is a kindhearted individual, their hands will likely be tied to policies that they hold no power to override. If rules require the reporting of a short sale with a terse \u201csettled\u201d or \u201cnot paid as agreed,\u201d there\u2019s little hope of arguing.<\/p>\n

What you can do in the meantime, however, is make sure that your other accounts \u2014 credit cards, auto loans, student loans, utility bills, mobile phone, and so on \u2014 remain current and in good standing. As your financial situation improves, you can start to save for a down payment and, in combination with an otherwise gleaming credit report, potentially be able to secure a new mortgage in time, even if your credit score has taken a dip.<\/p>\n

Tucker recommends proceeding with a short sale rather than letting a home go into foreclosure whenever possible.<\/p>\n

\u201cA short sale is really the best way to go as opposed to foreclosure because you\u2019re able to recover after two years and purchase your next home,\u201d she says. \u201cDo the short sale and then wait those two years and see where your credit is at. After year one, you might look to some sort of credit repair specialist to see what makes sense.\u201d<\/p>\n

So, while it\u2019s unlikely that you can sell your home via short sale today and buy another home tomorrow, it\u2019s not the end of the road. Take this time to get back on your feet, refocus, and move forward.<\/p>\n

\u201cIt\u2019s okay,\u201d says Tucker. \u201cThings happen, and we move on from them.\u201d<\/p>\n

Header Image Source: (Matt Hardison \/ Unsplash)<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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