Nowadays its more common than not to see a seller owe more on their home than what it’s worth. It’s an unfortunate place to be in when you’re faced with needing to sell your home.
I was meeting with a seller the other day who owes $625,000 on their home. They wanted me to list the home for $680k to give them room to negotiate down in price and still cover their closing costs. The reality is that the current value of the home is only $575,000. That means that the seller has three choices. a) Stay in the home and try to keep up on the payments. b) Go to closing and pay the difference, not an option as they don’t have the money, or c) Negotiate with their lender and do a short sale.
This seller hadn’t thought about the short sale option but was intriqued by the idea. She called her lender and was told that “yes” in fact, she could do a short sell and if she stayed current on her mortgage payments that it wouldn’t negatively affect their credit…. not sure if that is true for every company.
She received a verbal approval and a short sale package in a couple of hours and we are well on our way to getting her home sold.
What I realized with this seller is that she had a huge sense of duty in needing to repay the full amount of the loan. Unfortunately, that wasn’t going to be an option. The market just isn’t going to bear the price she needed to get and she can’t afford to stay in the home until the market turns around. She’s still current on her mortgage and does not want to fall behind. She has a sense of shame in not being able to repay the entire debt.
We talked about that for a long time and came to the conclusion that the market collapsing was not her fault and she couldn’t control the declining price values. We also concluded that by her being pro active she was going to be helping the lender out. They won’t have a bad debt on their hands because she will stay current on her mortgage, the lender is making that possible by deferring two of her mortgage payments until the home sells. In addition, they do not have to spend money trying to collect a bad dept or foreclose. They win by writing off less and she wins by saving her credit and being able to get into something more affordable.
The majority of people that I’ve seen in this situation are trying to be responsible. They just don’t know the proper steps to take. If you’ve called your lender and they told you you had to be behind on your mortgage before they would consider a short sale, call a reputable professional to help.
