Is A Short Sale Your Best Option?

Is A Short Sale Your Best Option?

Is A Short Sale Your Best Option?

You Must Get Bank Approval In most cases, the lender will not consider a short sale until you have a qualified buyer. But if the lender thinks your home is worth more than what the buyer is offering, you will probably not get bank approval. Lenders base their options on either a BPO or a formal appraisal of the property. An agent who does a comparison of 3 or more closed sales, active listings and other relevant market information does a BPO or Broker Price Opinion. An appraisal is done by a licensed appraiser and focuses mainly on closed sales. Keep in mind than any lender will agree to a short sale rather than face a foreclosure if the lender feels the price is right. The reason for this is that it is more costly for the lender to foreclose than it is to accept a short sale.

Be Prepared to Wait Today's lenders are handling multiple foreclosures and short sales in addition to yours and this can create a time-consuming backlog. In addition, if there is more than one loan on the property, all lenders must agree to the terms of the short sale. This means that more than one lender must see the value in going with a short sale rather than a foreclosure. This means that both the buyer and the seller must practice patience.

Give Your Agent Written Approval to Negotiate Without a letter from you, Privacy Laws may prevent the lenders from talking to your agent about your loan.

Be Aware of Possible Credit Liabilities If your lender requires that you sign a promissory note for all or part of the discrepancy between the sales price and what you owe, it may make more sense to consider foreclosure. In many states, purchase money mortgage loans are nonrecourse, which means the lender cannot require that you pay the discrepancy.

Tax Consequences You may be required to report the amount of your loan that was forgiven as income and report it on your income tax.

Are There Any Other Options?

In some cases it may make sense to rent or lease the property until your own finances improve or the Huntington Beach real estate market improves. Another option is to consider a loan modification. In other words, you ask your lender to refinance with smaller payments and add the delinquent amount to the balance of your loan. This is a tough option as lenders require excellent credit these days for both original and refinance loans. A third option might be an arrangement to pay a larger monthly amount to your lender until the loan is current. If none of these options are possible and your lender will not agree to a short sale, your only recourse may be foreclosure.

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