5 Tips for Selling a Home As a Short Sale

Posted by Lauren Schneider on Monday, August 24th, 2020 at 9:28am.

What to Do Before Listing Your Home as a Short SaleCompared to a foreclosure, a short sale is one that requires much more time and effort on the part of a seller. Understanding a short sale can make it easier to dive into the different stages. Here is what homeowners should know about the short sale process. 

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

Start with the Why

There are a few key reasons to choose a short sale over a foreclosure:

  • Control: A short sale gives the homeowner more bargaining power, which can be invaluable during a tough time.
  • Credit: A short sale will affect credit scores less than a foreclosure will.
  • Closure: Short sales give homeowners a way to settle their debt and move on.

While there's more work to be done, the rewards of a short sale are usually worth it. Homeowners who know the benefits from the start are much more likely to stick with the short sale process.

Talk to the Lender

The point of a short sale is to save the lender from having to hire a real estate agent, stage the home, arrange an auction, and advertise to buyers. Not only do the lenders not have to invest the time, but they might also get a better price from the short sale with a little extra time and attention from a motivated seller.

In some cases, lenders will agree to take less than what they are owed by the homeowner after negotiating a deal. In others, lenders may need to see additional evidence to agree to the homeowner's terms, such as sufficient proof that the homeowners are encountering financial hardships that cannot be resolved without the short sale.

Different lenders have different policies for a short sale, so it is important for sellers not to make any assumptions until asking how to proceed and what will happen in any given situation. Additionally, sellers need to be honest about the state of the home. For example, if there is a lien on the home, then the lender should know about it at the beginning of negotiations.

Find Out How the Debt Is Paid

Debt from a short sale can be labeled as either paid or settled, which does have an effect on a homeowner's credit score. If the lender is labeling the debt as paid, this will mean that the scores will come down less than if the debt is settled. (The amount a credit score decreases is in direct proportion to how many mortgage payments were missed.)

Just as lenders will have different policies for homeowners, different states will have varying regulations for lenders. In some states, settling the debt will release the seller from liability, but in others, the lender can still send a bill even after the sale officially goes through. Owners can try to negotiate a waiver prior to selling that can help them avoid this unfavorable situation.

Work with an Experienced Agent

Some people expect short sales to be a quick and easy process, but the reality is much different. An agent should have the experience to navigate a short sale and ultimately earn enough from the sale of the home to satisfy the lender.

Sellers should ask short sale agents how many times they have completed the short sale process, what their strategy is, and how long their average escrow is. The paperwork of a short sale has some difficult questions, making it easy to overlook a question or misunderstand the details. Only agents with a proven track record will be able to find the right solutions.

Be Prepared for the Process

A home buyer who is opting for a conventional home sale will usually be able to lock in their interest rates when they first apply for a home loan. With a short sale, the rules change. If lenders are financing the short sale, then they have the right to increase their interest rates at will.

The point of a short sale is to help both the lender and homeowner work together toward mutual satisfaction, and it all comes down to the homeowner making the effort to do as much as possible during the process.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

Leave a Comment

Format example: you@domain.com
Format example: yourwebsitename.com