How Does A Short Sale Work

How does a short sale work? The short answer is “usually very slowly” and this is the main problem which can scare away all the potential buyers for your property. The basic idea of short sale is that you sell your property for a smaller amount that you owe to your mortgage holder – for example, you owe to the bank $400k in mortgage but your house have lost its value and now is worth about $300k – if your lender agrees to sell it for this amount and settle the debt, you can do a short sale.

However, before you can even start this process you have to check if you qualify for it – basically, you have to prove that you are in financial troubles and do not have any equities or properties to sell or income to pay mortgage payments. To do this you must supply hardship letter for short sale proving all of the above.

One of the major problems of short sale is that whole process is managed by your mortgage holder making it somewhat cumbersome and very slow in most cases. Even if you have a ready to pay buyer for your property, all the paperwork goes through your mortgage holder and you or the realtor who is working this transaction is required to submit purchase agreement in writing with all the estimated closing costs. In many cases, a potential buyer can drop out just because it can take very long.

Keep in mind, while short sale is by far not the best option for you, it is way more preferable to let the property undergo foreclosure process. Take a look at foreclosure consequences to get an idea how bad it can get! In a short, foreclosure will devastate your credit rating, can cause you to pay taxes and may cause big problems if you decide to take another loan for many years or even permanently never mind all the embarrassment and stress!

How does short sale work?

When it comes to situation when you are unable to pay your mortgage payments and have financial problems, first of all, do not sit on them. If possible, put your property on the market fore sale as soon as possible! To start a short sale process, you need to write a hardship letter for short sale to your mortgage holder explaining in detail your financial situation including all the financial statements, credit car bills and so on to prove your inability to pay and the fact that you do not own couple houses in Florida which you could sell to cover the debt. Take a look at our post about hardship letter for short sale – this will give you good idea how does short sale work!