What Do You Need to Know For a Short Sale Transaction?
- While the decision to use a short sale option may not be for everyone, this method may be a good way for certain homeowners to avoid some considerable bad debt. For homeowners who have little or no equity in their homes and who have had consistent trouble making their mortgage payments, a short sale may be a good way to clear up a large portion of debt. Another scenario could be a homeowner who owes more on the property than the current market value of the property.
- One of the biggest mistakes homeowners make when going into a short sale is not finding a realtor who is an expert in short sales. Get referrals from friends and business colleagues, or ask at your financial institution which realtors have a reputable track record of facilitating short sales. Obtain references from realtors and check those references, talking to real estate clients who have gone through a short sale to ensure the realtor in question handled their short sale efficiently.
- You will need several pieces of documentation when completing a short sale. Most lenders will ask for proof of hardship. You will need to acquire a hardship letter from your mortgage company that states you have had difficulty meeting mortgage payments. You may also need to show a decrease or loss in income and may have to produce copies of pay stubs and income tax papers. You may also need documentation from your city or county showing that the property values in the area your home is located have declined significantly. You must also show that you are in default or are about to go into default of your home loan.
- While a short sale is not as damaging to credit as a foreclosure, it still can negatively affect a credit rating for a homeowner seeking to sell her home using this method. For a buyer, a short sale is a good way to get a home at a discounted price; however, there is considerably more paperwork to attend to than there is with the conventional sale of property. Another consideration for home buyers is the fact that short sale properties often are sold "as is" and may need a great deal of renovation.