Short Sell Your Home

What if I can only sell my property for less than I owe my lender?

If you are struggling with your home loan and the value of the property is less than the mortgage amount, make sure you explore all options with your servicer, as well as an attorney or a housing counselor.  In most cases, America’s Choice Lending & Realty can help explain to the lender why it makes sense to sell the property for the best price and then forgive the remainder of the debt.

Until recently, the amount of debt the lender canceled was treated as income when you filed your tax return.  Real Estate agents and others helped pass legislation that will prevent this tax burden from being placed on eligible homeowners who are relieved of their obligation to pay some portion of their mortgage debt between January 1, 2007 and December 31, 2012.  Full relief is available only if the amount of forgiven debt does not exceed the dept that was used to acquire, construct, or rehabilitate a principal residence.  Other limits also apply; consult your tax adviser or IRS guidelines for details.

Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect.

Contact the Lender

Your real estate agent will contact the lender for you to make sure that you are working with the correct department and are sure of what documentation they will actually require.

Submit Letter of Authorization

Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan. The letter should include the following:

• Property Address
• Loan Reference Number
• Your Name
• The Date
• Your Agent's Name & Contact Information

Preliminary Net Sheet

This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any. Your closing agent or lawyer should be able to prepare this for you, if you do not know how to calculate any of these fees. If the bottom line shows cash to the seller, you will probably not need a short sale.Hardship Letter

The sadder, the better.

This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized or a truck ran over your entire family, but lenders are not particularly empathetic to situations involving dishonesty or criminal behavior.

Proof of Income and Assets

It is best to be truthful and honest about your financial situation and disclose assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.

Copies of Bank Statements

If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it's probably a good idea to explain each of those line items to the lender. In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.

Comparative Market Analysis

Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a comparative market analysis (CMA). Your real estate agent can prepare a CMA for you, which will show prices of similar homes:

• Active on the market
• Pending sales
• Sales from the past six months.

Purchase Agreement & Listing Agreement

When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to pay for certain items such as home warranty or termite inspections.

Now, if everything goes well, the lender will approve your short sale. As part of the negotiation, you might ask that the lender to not report adverse credit to the credit reporting agencies, but realize that the lender is under no obligation to accommodate this request. Credit report status is not always negotiable.

Next Steps:

• Sellers
• Selling Process
• Selling Tips
• Your Home's Value
• Contact Us