When you owe more money on your home than what it’s worth, you have an underwater mortgage. Do you know that approximately 4.5 million Americans have underwater mortgages? Therefore, if you have one, you’re not alone.
When you’re in this position, it might take years to dig your way out. If you don’t think you’ll ever get out of this mess, there’s an alternative – a real estate short sale.
A real estate short sale lets you sell your house for an amount that is less than your current mortgage balance. If you’re curious about how this works, continue reading to learn more.
The Basic Principles of a Real Estate Short Sale
Using a real estate short sale is a different approach than selling a house through other methods. When you sell with a short sale, you sell the home for a price that is less than the current appraised value of the home.
You can hire a real estate agent to complete a short sale, or you can look for a company specializing in real estate investing. You can contact a company like this and ask them, “how do I sell my house fast?” They’ll make a cash offer on the spot.
When you receive an offer on your house, the offer goes to your lender. Your lender must review it before the deal can go through.
A Short Sale Requires Your Lender’s Approval
One vital thing to understand about short sales is that they require the lender’s approval. You cannot hire a real estate broker and pursue a short sale unless you have your lender’s approval.
To get your lender’s approval, you’ll need to call them and talk to them about your situation. Your lender will complete some steps to review the situation and will decide. If the lender approves it, you can proceed to look for a buyer.
When you find a buyer, the lender must approve the amount of the sale. Your lender might allow a short sale, but they might have a minimum amount they need.
For example, if you owe $250,000 on your home, the lender might accept an offer if it is at least $200,000. Lenders must approve all sales before you can proceed.
Questions to Ask When Using a Short Sale
If you want to sell your home with a short sale, you might want to ask your lender a few questions. First, you should ask what they will accept as the minimum amount.
Next, you should ask if you are responsible for the deficiency. The deficiency is the difference between the amount you owe and the selling price.
Finally, you should ask about the tax consequences. You might not have to pay the deficiency, but you might have to include this amount as income on your tax return.
A Short Sale Is an Ideal Solution
Trying to get out of an underwater mortgage by making your payments might take you years. If you want an instant way out, look into a real estate short sale.
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