Being Underwater on Your Mortgage
If you find yourself in a situation where the balance of your mortgage is higher than the current market value of your property, this is called being "underwater." If you need to sell your house due to a financial hardship but can't sell it for enough to pay off the bank, you need a short sale.
How a Short Sale Works
A short sale is a real estate transaction where the lender agrees to let you sell the property for less than the outstanding loan balance, and they accept the proceeds of the sale as a complete payoff of the debt.
Why Would a Bank Agree to a Short Sale?
Foreclosure is an incredibly expensive legal process for a bank. A short sale allows the bank to cut their losses early, save on legal fees, and get the non-performing loan off their books.
The Short Sale Process
- Prove Hardship: You must submit a "hardship package" to the lender proving you can no longer afford the payments.
- Get an Offer: You must secure a legitimate offer from a buyer. As your Realtor, we actively market the property to secure this offer.
- Lender Review: The bank will order an appraisal or BPO (Broker Price Opinion) to verify the home's value. This process can take 30 to 90 days.
- Approval and Closing: If approved, the bank issues a letter stating the terms, and the sale closes.
A short sale is a complex legal negotiation. You should never attempt one without an experienced short sale Realtor advocating on your behalf. Please note: Short sales are subject to strict lender approval and are not guaranteed.