Talk to a supervisor or manager if possible; this person will have more authority. Plus, ask the lender what its procedures are for a short sale. Some lenders are willing to work with you by reducing the amount owed or making other arrangements. Others will look to the agents involved (if any) or anyone else who's making money off the transaction to see if they are willing to make concessions to make the transaction happen. Still other lenders will tell you that your debt is your responsibility, one way or the other. And finally, sell your property.
A word of caution, however: Closing costs will include title and escrow fees (if the seller is responsible for any portion of them, which will depend on your county), attorney fees, a portion of unpaid property taxes, re-conveyance fees, notary fees, delivery fees, documentary fees and/or transfer fees. If you sell the property without the assistance of a real estate broker, you will save the amount of the commission and have more to apply toward paying off your loan. If you feel more secure having a real estate broker handle the transaction, consider using a discount broker to market your property.
You could also try to negotiate the sales commission with your broker. Remember that the amount on your monthly loan statement does not include interest. Interest is accrued until the date a loan is paid off, so you may have as much as 30 days of interest on top of the balance owing, and you'll need to include this interest in the total payoff amount. If a property is sold under a short sale, the lender may require the buyer to make up the difference, either through a personal obligation or a collection. The IRS often gets involved with short sales, because they are seen as a relief of debt and may be treated as income. Check with your accountant.
A lender requires many things from you if you are considering a short sale.It is for their own benefit. Packaging is crucial. When you place the property on the market with an agent, your agent should send the lender several documents including your past two years of tax returns, a letter of hardship, a completed loan application, a preliminary title report, a listing contract, copy of MLS, a marketing plan of your home and a broker price opinion (like an appraisal).
“Realtors often have a difficult time packaging the short sale documents required by the bank,” remarks Toste. “Agents must check all the angles of a short sale to protect their clients, such as credit consequences, potential tax liabilities and the bank's ability to pursue the seller for a judgment.”
When you have the offer, all of the above should be included with the offer with the exception of the marketing plan. You'll also need to include the purchase agreement and a good faith estimate as to what the lender will net after the close of escrow.
Thompson recommends that buyers make a commitment to own their dwelling for the long term-at least five years before values are above today at any significant extent. “Now is the time to buy for the long term and not for investing,”Thompson continues. “Interest rates are low and there are plenty to choose from. Buy for the right reasons. Get a good realtor and don't buy more than you need and get the fixed rate mortgage; a home that fits into your family plan. Basically it's a very good time to buy a home.”
“The nightmare is many smart and responsible people are caught up in the real estate "moment" and signed up for a loan product wrong for them so they could buy a house that was bigger than they really needed. Unfortunately, now there is no way for them to stay current on their mortgage,” comments Thompson. “These are the people for whom a short sale is appropriate. We need more lenders that are cooperative.”
Don't panic. Many homeowners in today's market don't think they have a choice about whether to stay or sell. This simply isn't realistic. If your equity has fallen and your calculations show no room for profit, you may think you have no recourse but to stay in your home. The opposite is true. There are qualified professionals who have implemented programs specifically designed to help you by negotiating short payoff arrangements with your lender.
