Underwater Mortgage Solutions: What Is a Short Sale?

Before we talk about short sales as a solution to your underwater mortgage, we want to give you a quick primer about the alternatives. That way you can compare short selling to the rest of the options you have when you’re faced with an underwater mortgage.

Now for the purposes of this article, we’re assuming that you can’t afford to pay the monthly payment on your underwater mortgage anymore. That’s the situation that most people who find our website find themselves in. With that said, here are some of the other options:

Applying for a loan modification can certainly delay or draw out a foreclosure, but fewer than 3% of homeowners actually qualify. And two of the available options will end up with you eventually paying more for your mortgage than you originally signed up for! But, if you can get the modification and when you do the math it makes sense to you, go for it.

You could give your mortgage lender a “deed in lieu.” This means you hand over the deed and the keys, and you walk away from the house. This is not a good option! Why? Because most mortgage lenders will hound you relentlessly about paying the difference between what they can sell the house for and the total amount of your mortgage. And because mortgage lenders aren’t set up to be real estate offices, they will sell your house for pennies on the dollar just to get rid of it.

The next option is foreclosure. With foreclosure, you can keep living in your house mortgage-payment free until you get an eviction notice. You’ll have to manage your way through a few years of less-than-stellar credit, but Kristin and I have been through this option, and it’s worked out well for us so far. You may also have to worry about your lender coming after you for the difference between the eventual foreclosure sale price and the amount you owe on your mortgage.

So how is a short sale different? With a short sale, the mortgage lender agrees to let you sell your house and agrees to take the price you get for it as a payoff on the mortgage!  And the right Realtor may be able to negotiate verbiage into the Agreement Notice (the approval on the short sale you receive from your lender) so your lender won’t come after you for the deficit.  We bet you can see the advantages here right away.

You’re out from under your underwater mortgage. You’ll be able to live in your house payment-free until it’s sold. And your credit rating won’t suffer as much!

There’s even a new federal program that might give you up to 00 to relocate. It’s about time the government started helping homeowners, isn’t it?

Short sales do take some work on your part though. You’ll have to hire an experienced, certified, short sale Realtor to negotiate with your lender. You’ll have to provide lots of documentation to your Realtor, so they can pass it along to your lender.  You’ll also have to prove financial hardship.

This might all seem hard. But when you’re dealing with an underwater mortgage on top of everything else, a short sale can be the best solution to your problems. At best, you sell your house and walk away scot-free. At worst, you delay foreclosure, sometimes up to a year or more.

Just be patient and don’t fall under the illusion that short sales are, well, short. They can take up to a year, just like any other housing sale! But spending a year without paying on your underwater mortgage isn’t a bad payoff for that kind of patience, is it?

Please don’t stress over finding the right Realtor to short sell your home.  We can help.  Just contact us and we will find a professional, certified short sale Realtor in your area.

This entry was posted on Monday, January 3rd, 2011 at 7:02 am and is filed under Short Sale. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.