With the glut of houses currently for sale in the housing market, it’s very tough for anyone selling their home. Its especially tough if the value of your house has gone down dramatically, and your home is worth less than your mortgage. What can you do in this market to avoid foreclosure if you’re in a situation where you can’t afford your home and you can’t sell your house for enough money to pay off the mortgage? You might speak to your lender or loan servicer (whichever entity you currently send your monthly mortgage payment to) about approving a short sale.  A short sale is when the lender or loan servicer agrees to allow you to sell your home for less than the amount you owe on your mortgage, and they will accept that sale amount to fully satisfy your loan obligation. Sometimes that’s a win, win for everyone involved. 

 

The earlier you contact a real estate agent and your lender or loan servicer, the more time you will have to find a buyer for your house or work out another solution with the bank.  Many real estate agents specialize in helping borrowers work with their lenders to get authorization and get the bank’s short sale requirements. The real estate agents may be able to assist you in getting documents together to give the lender and they may help you respond to questions the lender may have about your circumstances. 

 

A short sale is no longer an option once the home is foreclosed by the bank. That means you must have an offer from a buyer, and the amount of the offer has to be accepted by the bank before the house is foreclosed. It can often take several weeks and maybe months to sell a home for a price acceptable to the bank and a buyer. You will want to try to work with a real estate agent that has experience with short sales. The time you have to sell will likely be limited by the timeline the bank must follow to foreclose on a home in your state.  Keep in mind that some states have very short timelines to process foreclosures, so if a short sale can give you relief, you need to move quickly. 

 

The real estate agent you select should be prepared to create a proactive marketing plan and help price your property appropriately to attract buyers and satisfy the bank’s requirements. You might be thinking you can offer your home for a low price to attract buyers and try to sell the property quickly just to get out of the situation, but the bank is not likely to accept a price lower than the current market value based on recent, similar home sales in the area. So, its going to take a little work on your part to make a short sale happen. 

 

Your real estate agent should present you with comparable property sales in the area to support the sales price you want to list the home for. At this point, you should again communicate with your bank to see if you can get preliminary approval within a sale price range. This will give you a better idea of the price you need to negotiate with a potential buyer. The bank really does not want to own real estate; that is not the business they want to be in. So if you are realistic and sincere in your sales approach, they just may give you the opportunity to sell the property yourself.   

 

During the sales process, you are still the owner of the property, and you will be the one to negotiate the sales price with potential buyers, not the bank. If you have done your leg work with the agent to price the property appropriately, and your lender has given you some input on pricing, a contract with a buyer for the sale of the home is more likely to get lender approval. Be careful to make your contract for sale contingent on the contract amount being accepted by your bank to fully settle your loan.   

 

Lenders are different and procedures change so it is important to keep the lines of communication open while you are selling your house. If you have a second mortgage or equity line of credit that must be satisfied along with the first mortgage at the time of sale, you will need to get approval from each lender and coordinate between them to ensure they will each release you from any debt obligation at the buyers purchase price. Again, most lenders do not want to own your property, so they are going to try to work with you. Still you must keep in mind that you may be one of a large number of customers trying to get the banks attention at this time so it will be up to you to keep the process going. 

 

Do not get the idea that this is going to be easy. Remember that even though the bank doesn’t want the property, they do not want to lose too much of their investment. While the bank may seem uncooperative at times, your understanding of their position as well as your own will help. Sometimes you may find it necessary to take your proposed sale to a higher decision maker at the bank. When this happens, if you remain polite and present your proposal with patience, you may be more successful in getting approval. Be willing to listen so that you will understand any suggested changes that can make the difference between a short sale being approved or denied.

 

Short sales are generally difficult and take time, but they can still be the best answer to avoiding foreclosure.