This is a loaded question that I deal with every day. If anyone tells you that there is an easy answer, they either have no experience with short sales, or are lying to you. The greatest issue in my humble opinion is whether this is going to resolve your problems. That is, understanding the ultimate result to unburdening yourself of a home you perhaps can no longer afford. It always saddens me when I get a client that has already exhausted their financial resources attempting to stay current with mortgage payments. If you are using savings to survive, you should be talking to me.
The first criteria for a short sale is obviously a hardship. That is, either a financial or personal need to sell the home. This may also pertain to investment property, second homes, as well as to one’s primary residence. If the home is creating a financial hardship, that is a problem.
The second criteria is that if you do sell this home, will you be in a more manageable financial position. This is an analysis that needs to be made up front. If you are burdened with many other debts (ie. credit cards, installment loans, other mortgages, etc.), you should be consulting with a bankruptcy attorney prior to even attempting to sell your home and request a short sale. Far too often people are persuaded to sell their homes without the appropriate counseling. If selling this home is still going to leave you personally under water, financially, you shouldn’t wait until you have exhausted much time and effort trying to avoid bankruptcy. Especially if at the end of the day, bankruptcy is unavoidable. Again, this is where a professional opinion becomes invaluable. If it is exclusively the home creating the problem, then a short sale is definitely called for to resolve the issue.
The third criteria is that one must be prepared to make a tough choice between “credit” or “cash”. That is, if selling the home is going to free up the necessary cash flow to survive, one must be ready to let go of their “perfect” credit score. Many people have spent years establishing their credit and are very resistant to disrupting that score. However, a short sale will create negative credit implications. If credit is more important to you then cash in your pocket, then perhaps you are not at the point of needing to unburden yourself of this home.
Sometimes people will say, “but where will I live”. My response to them is that you find a nice home or apartment to rent at a fixed price. Many people fail to evaluate the extraneous expenses that come with owning a home. It isn’t just the mortgage payment, taxes and insurance. It is the additional burden, depending upon the size of the home, for utilities, maintenance, etc. that goes with home ownership.
If you are real estate agent that is sitting on listings that are not moving, and the seller’s are resistant to re-pricing, it is quite possible that there is information they are not sharing with you. Perhaps scheduling an appointment with a Short Sale Expert to explain this process will help. Often people are not forthcoming with their financial worries. However, if I can describe for them the process and what it can do for them, they may be more willing to make adjustments to get a sale accomplished.
I am going into my 4th year of counseling people on the “ins and outs” of short sales, deeds in lieu of foreclosure, and loan modifications. If you would like to understand better how your circumstances present with regards to any of these alternatives, please feel free to call me to schedule a free consultation.
