Do You Owe More Than What Your House Is Worth?
A Short Sale Would Be The Best Solution
A short sale is industry terminology for settling with the bank for less than what is owed. Like how one can do with a collections account or delinquent credit card. This process avoids the courts and having a foreclosure on your record.
The process for a short sale can be lengthy but it is well worth it if you are in this scenario.
With a SS the bank will work with you and a licensed Realtor to get a value on the property and locate a buyer.
It benefits you as they will settle the account and you will not have to pay the difference of what is due. They might even pay for you to relocate. This is a better option than foreclosure
As a mortgage originator for many years, I can tell you from experience lenders prefer to see a short sale before any foreclosure. You can usually buy another house via an FHA mortgage after two years from the settlement.
There can be some tax implications please speak with an accountant and the servicer if they would be giving a 1099-C which is a cancellation of debt
The most common practice to bring the monthly payment down is by re-amortization of the loan.
The bank will need to review your current income and the condition of the property. The lender will look to accept an offer on the current market value in its As-Is condition. If the property is distressed in any way, we would negotiate and provide repair costs to the lender.
It is best to give the bank as much information as possible about the buyer’s offer. In other words, if it needs repairs to provide repair bids, they like to see at least three bids from licensed contractors for the work needed. The more information provided the better it is for them to accept the offer.
If the bank accepts the Short Sale, they will sell the property and you will need to relocate. Back in the HAFA days, there was relocation assistance being provided to homeowners. I believe some of the services have continued this practice. It gives them security the property would not be vandalized, nor would they need to spend the money on going through foreclosure. Make sure to ask your servicer if they provide relocation assistance. It is also known as “Cash for Keys”
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