These questions are typical for homeowners who seek out my advice. Some answers cannot be provided in this type of forum due to the many variables that can exist with each homeowner that will change to outcome of what course of action will be best for them. But, generally speaking, the following will apply to a typical homeowner struggling to pay their mortgage.
When Should You Consider a Short Sale?
If you have no interest in keeping your home, then a short sale is typically the next step if the house is worth less than what is owed on the mortgage. If you would like to keep your home, then you should consult with a HUD counselor or attorney immediately. Even if you have been denied a loan modification, new laws now allow you to meet in-person with your lender and attend a mediation to work out a loan modification with the help of a counselor or attorney. If you have more than one mortgage, multiple properties or other assets, then you should seek legal advice before proceeding with a short sale. Real estate agents and short sale negotiators have a financial interest in having you sell your home; your attorney does not, and only an attorney can explain your legal options and risks associated with each option.
Do I Need a Short Sale Agent?
Selling your home short is not something that any homeowner should attempt to do without the assistance of an experienced short sale agent. For one, you pay none of the commission, and second, only an experienced agent will know how to properly market your home so that you can get an offer in time to avoid foreclosure. Most lenders and beneficiaries also require that the home be listed by an agent before they will consider an offer. There are some exceptions, but you will need an attorney to review your loan and situation to find out if an exception applies to you.
Do I Need a Short Sale Negotiator?
Getting your short sale approved by the lender and beneficiary is not something that any homeowner should attempt to do on their own. Most real estate agents with short sale experience have negotiators that they work with, and the homeowner does not pay the negotiator's fee. The fee to negotiate a short sale is typically paid by the buyer or in some cased by the lender or agents. Some attorneys will negotiate a short sale for a fee, but most short sales do not require this level of negotiation. Your attorney should be on hand to review the PSA before you accept it, review the short sale approval letters, and assist your negotiator should they run into problems getting the offer approved. Other than that, an experienced agent and skilled negotiator is all you need to get your home sold and your short sale approved.
How Long is the Short Sale Process?
Assuming you have hired an experienced short sale real estate agent and skilled negotiator, most homes will get an offer within 45 days from the listing date. Approval of the offer can take another 45-60 days, with closing shortly thereafter.
Will I Avoid Foreclosure if I List My Home for Sale?
Listing your home for sale WILL NOT stop the foreclosure process. Most lenders will postpone foreclosure only when an offer is submitted. If you have received a Notice of Default, speak to a HUD counselor or attorney right away to find out how you can use Washington's Foreclosure Fairness Act to postpone foreclosure and give you more time to sell your home. You will only have 30 days after you receive a Notice of Default to take advantage of the new law, so do not put it off or it will be to late.
How Long Can I Stay in My Home if I Do a Short Sale?
You can, and should, remain in your home until the short sale offer is approved and title has transferred to the buyer. Typically, the entire process will take 3 months. Some homeowners can move out before closing, but as long as you remain on title, you are responsible for repairing the home in the event of vandalism. The home also must also be maintained as the primary residence in order to take advantage of the Mortgage Debt Relief Act, which allows homeowners to avoid paying income tax on debt relief related to their primary residence.
When is Foreclosure a Better Option?
If you have multiple homes or other assets, or you are selling a second home, foreclosure could be a better option for you. Talk to an experienced short sale attorney about your options and risks before you list your property for sale.
Michele McNeill is a real estate lawyer in Washington State. She works with Sellers, Real Estate Agents and Negotiators on Short Sale and Foreclosure issues. This blog is intended to cover general topics for informational purposes only and is not intended to be taken as legal advice or to create an attorney-client relationship. For more information about your legal rights and options, please call (425) 455-4307.
