Explore the Mortgage101 Library
Check Local Mortgage Rates
Loan Program Choices
Use our calculator to find out your estimated monthly payment in advance: Enter the loan amount, interest rate, and length of mortgage.
Try our Mortgage Payment Calculator
A short sale is an alternative to foreclosure that helps the seller move from the home he or she can no longer afford and allows the buyer to move in quickly. A short sale occurs when the bank accepts a reduced payment as payment in full for the balance on the loan. Depending on the lender, the seller may or may not be required to pay the difference. While the seller's credit score will still suffer, it has an impact less negative than foreclosure. However, there are five common ways to ruin a short sale.
1. Stop Paying Homeowner's Association Dues
Throughout the entire process, it is very important to continue paying homeowner's association dues despite the fact that payments are no longer being made on the mortgage. The Homeowner's Association can also foreclose on your home if you stop making those payments, and the short sale is with the bank only.
2. Not Pricing Accordingly
The home should be priced reasonably. Make it high enough for the bank to get its value and investment back, but keep in mind the current market and what buyers are looking for. There is no time to negotiate with multiple back and forth offers. High pricing will send buyers running, but low pricing will cause even lower offers to come in because buyers are going to try to get the best possible deal. Pick a good price and stick to it.
3. Erroneous or Lacking Paperwork
The short sale process is no different than a traditional mortgage in the sense that a lot of paperwork will need to be done. It is important to complete everything correctly and on time because if any errors or incomplete forms are found, it could slow down the deal or stop it from happening all together. Don't let this happen to you. Be thorough and truthful.
4. Inexperienced Agent
It is important to get an experienced agent with a short sale because you need smooth, quick, and efficient communication between the lender and the potential buyers. There is not a lot of time to work with, so the people involved need to know what they are doing. The home should be marketed a lot and marketed well to bring the right kind of buyers into the picture right away.
5. Lack of Cooperation
The most important thing sellers need to do for a successful short sale is cooperate. There is going to be a lot going on in a short period of time as they try to sell their home and avoid foreclosure. There will be a lot of phone calls, a mountain of paperwork, and many other demands. Keep the house clean so you can show it to buyers at the drop of a hat. Keep the house in good condition because a buyer can back out if the condition worsens before closing.
To avoid dooming your short sale, make sure you continue to pay dues, price the home accordingly, complete all necessary paperwork correctly and on time, use an experienced real estate agent and cooperate with the buyer, the lender, and your agent.
- Appraisal Basics
- 3 Reasons Banks Reject Short Sales
- Second Mortgages: Advantages and Disadvantages
- What To Do When Mortgages Default
- FHA Eligibility with Bankruptcy and Foreclosure
- Alternatives to Getting a 2nd Mortgage
- Short Selling a Rental Property
- Low Down Payment Loan Qualification
- 3 Common Short Sale Mistakes