Marketing your home as a short sale means the lender must accept less for the house than is owed on the mortgage. You still own the house, but the lender must agree to the price. The process can be long and tedious, but knowing what is expected of you helps facilitate the sale. It can also circumvent a foreclosure.
Hire a Professional
In most states, short sales must be handled by short-sale certified real estate agents. Interview at least three agents in your area. Ask each to present comparables and to suggest a listing price. Look carefully at the reports, noting if all the comparables were “like-for-like” -- all short sales, similar sized homes, and all in your neighborhood. Examine how long each sale was on the market and whether price reductions were made. Choose the professional who sets a realistic price, has many short sales under her belt and can effectively market and sell your house.
Contact the Lender
Your point of contact with the lender is in its loss mitigation department. If you’re late with your payments, an asset manager will already have information on your home and she is the one you will speak with. You don’t need to be behind in your payments to request a short sale. Ask for the short-sale package, an authorization letter allowing your real estate agent to speak with the lender, and comply with all requests for information contained in the package, including the hardship letter.
Pay Your Homeowners Association Fees
If you live in a homeowners association -- HOA -- continue to pay your dues. Many short sales have fallen out of escrow because of excessive dues owed and the lender refuses to pay them. Buyers don’t want this added cost. HOAs have the power to foreclose on your home for delinquent dues, ahead of the lender.
Maintain Your Home, Inside and Out
Start the cleaning process. Declutter, paint the walls a neutral color, clean the carpets, touch up the exterior paint and give your home curb appeal. You’re competing with other short sales and want your home to stand out. Do not remove any appliances or fixtures that are included in the listing. Let the buyer see what he is getting or he may back out at the last minute, leading you closer to foreclosure.
After you have agreed to and signed an offer on your property, your agent presents it to the lender, defending the price and submitting the most recent comps to justify the offering price. The lender has 30 days to acknowledge receipt of the offer, and another 30 days to accept or reject it. Your short-sale package is also presented at this time, if it hasn’t been sent in already. You can accept backup offers during the time the lender is considering the offer already on the table, but they cannot be presented until the lender declines the offer already in front of him.
Attend the closing and sign all the paperwork. You won't have to pay any of the selling costs as these are handled by the lender. Avoid a deficiency judgment by making sure the closing papers include a waiver of deficiency, preventing the lender from coming after you for the difference in what the house sold for and what you owe.
Jann Seal is published in magazines throughout the country and is noted for her design and decor articles and celebrity *in-home* interviews. An English degree from the University of Maryland and extensive travels and relocations to other countries have added to her decorating insight.