A distressed property is one that is under some sort of challenge related to its financing. Most homeowners end up doing distressed sales when they can't pay their mortgage. A short sale can be be a way that homeowners can sell their property under distress and still avoid going through a foreclosure. Selling this way requires some different strategies than a traditional sale.
Talk to your lender's loss mitigation department and find out its process for approving a short sale. If it gives you permission to do a short sale, get that permission in writing. You don't want to be marketing your home and have the lender pull the rug out from you. If the lender approves the short sale, find out what its offer consideration procedure will be. Also, if you can, get a written commitment that the lender will release you from your responsibility to pay back any deficiency under your note. If you don't do this, you can be pursued for any difference between the selling price and what you owe.
Assess your home's market value in its present condition and adjust it for the fact that you're doing a short sale. If you aren't going to use a real estate agent that will price the property for you, you can have a professional appraiser complete a valuation report on the property. Let the appraiser know that you're looking for a sale value for the property on a short sale basis so that he can set the price accordingly. (Ref 5) Generally, the value of your property on a short sale will be less than on a traditional sale since the buyer will both have to wait for bank approval to buy and will take the risk that the bank won't approve the price.
Market the property, remembering to let buyers know that your property is a short sale. If you have a real estate agent, he will take care of this for you. If you don't, place a sign in your yard and advertise your property on as many websites as possible. In addition, promote your home to your social media network so that people you know can help you find a buyer. If people in your area hold open houses, hold yours at the same time and place your "Open House" sign near theirs so that you can benefit from their traffic.
Include language in your purchase agreement letting the buyer know that you're doing a short sale and that the transaction is contingent upon your lender's approval. If you don't have an agent that can supply the language for you, consider having an attorney write it for you. While you're at it, include as-is language in the purchase agreement. This lets the buyer know that you won't contribute to the cost of any repairs. Since there isn't any money coming out of the transaction, you usually won't have funds to make the repairs, anyways.
Sign a satisfactory offer when you receive it. This will place the buyer under contract.
Submit the offer to your lender for approval. This process can take weeks or even months. While the lender is working on the offer, your buyer will probably be working on his inspections and loans. Once the offer is approved, you'll be able to close the transaction.
- BusinessDictionary.com: Distressed Property
- Bankrate: How to Navigate a Short Sale
- Bankrate: Five Buyer Mistakes in a Short Sale
- Windermere Real Estate: Short Sale FAQs: Understanding the Short Sale Process
- ForSaleByOwner.com: Pricing Your House Correctly with a Property Appraisal
- ForSaleByOwner.com: How to Hold a Successful Open House
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