What exactly is a short sale?
I’ve run into some financial problems and need to sell my home. My sister is part owner of the home but she can no longer pay her part and the mortgage payments on this townhouse are 2 much for me to afford on my own. We are behind 2 mortgage payments at this point and from what our realtor told us a short sale would prob. be best. Would we still have to pay for those last 2 months? cause’ at this point were both basically broke. Also, in a short sale.. how much time do you usually get to keep living in your home? and do you still have to keep making payments?
If you have equity in the property then it isn’t a short sale, but just a sale. If you have no equity or owe more than the townhouse is worth, then you can ask your lender if you can do a ‘short sale’. If you owe $220,000 and the townhouse is worth $250,000, just sell it. After commissions, etc., you’d only break even, but at least you wouldn’t owe the mortgage anymore. My guess is that you don’t have any equity though…
A short sale means that you will sell the property for less than you currently owe. The bank agrees that this amount will satisfy the mortgage. (for example; you owe $250,000. The townhouse is worth $220,000. The bank agrees to take $220,000 to satisfy the mortgage. You get lucky and find a buyer at $220,000, sell the townhouse and don’t owe anything more.). In the past, the difference between the sales price and the amount you owe would have counted as taxable income to you, but a recent bill has suspended that and you wouldn’t even owe the taxes on the difference.
This is much different (and better for you) than a foreclosure. In a foreclosure, you fall behind on your payments, the bank notifies you that you have breached your agreement with them. They go to court and get permission to take the collateral (the townhouse). They auction it off. They bill you for the difference between what you owed and what they sold the place for (adding on lawyer’s fees, etc.).
In a short sale you live in the house until it sells. Getting a lender to agree to a short sale will also short circuit the foreclosure process.
Your credit is getting trashed as you fall behind on your payments. You need to contact your lender to work something out, whether that is a reduction in your payment or adding the two overdue payments to the balance of your mortgage. If you can get/keep current through the process, your credit won’t get completely mangled. There is also a chance that the mortgage company will stop reporting you as late if you are undergoing a short sale.
It’s got to be a stressful situation. Take care of yourself and remember that this will be temporary. Don’t let the stress ruin your health.
good luck!
March 3rd, 2010 at 6:34 pm
Value of your property is ‘short’ of (less than) the proceeds from a sale.
A short sale is when you contingently sell your property to a buyer, then approach your lender and ask for the final payoff (mortgage balance mostly) to be reduced, since the value is lower and the bank may likely face higher costs by foreclosing on you. Length of stay at your home, depends on the terms you might be able to work out with the buyer of the property.
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March 3rd, 2010 at 6:58 pm
A short sale is when you sell your home for less than you owe. To be successful, your lender must agree to accept less than your payoff amount as full payment for the mortgage. This will show up on your credit report as a satisfied debt. Usually you can get the bank to agree to not come after you for the difference between what you owed on the home and what you can sell it for, but you MUST get this in writing. If that is the case, you will owe nothing (not even the back payments). Typically you will be able to continue living in the house until the sale closes, or possibly 30 days after, if agreeable to the buyer, to give you time to move.
References :
Licensed Realtor in MI
March 3rd, 2010 at 7:42 pm
If you have equity in the property then it isn’t a short sale, but just a sale. If you have no equity or owe more than the townhouse is worth, then you can ask your lender if you can do a ‘short sale’. If you owe $220,000 and the townhouse is worth $250,000, just sell it. After commissions, etc., you’d only break even, but at least you wouldn’t owe the mortgage anymore. My guess is that you don’t have any equity though…
A short sale means that you will sell the property for less than you currently owe. The bank agrees that this amount will satisfy the mortgage. (for example; you owe $250,000. The townhouse is worth $220,000. The bank agrees to take $220,000 to satisfy the mortgage. You get lucky and find a buyer at $220,000, sell the townhouse and don’t owe anything more.). In the past, the difference between the sales price and the amount you owe would have counted as taxable income to you, but a recent bill has suspended that and you wouldn’t even owe the taxes on the difference.
This is much different (and better for you) than a foreclosure. In a foreclosure, you fall behind on your payments, the bank notifies you that you have breached your agreement with them. They go to court and get permission to take the collateral (the townhouse). They auction it off. They bill you for the difference between what you owed and what they sold the place for (adding on lawyer’s fees, etc.).
In a short sale you live in the house until it sells. Getting a lender to agree to a short sale will also short circuit the foreclosure process.
Your credit is getting trashed as you fall behind on your payments. You need to contact your lender to work something out, whether that is a reduction in your payment or adding the two overdue payments to the balance of your mortgage. If you can get/keep current through the process, your credit won’t get completely mangled. There is also a chance that the mortgage company will stop reporting you as late if you are undergoing a short sale.
It’s got to be a stressful situation. Take care of yourself and remember that this will be temporary. Don’t let the stress ruin your health.
good luck!
References :