Key takeaways:
- Homeowners who owe more on their home than its market value may choose to sell their home as a short sale
- Short sales are considered distressed properties, but a short sale is typically less damaging to a homeowner’s credit than a foreclosure
- Short sales can take several months, but there are short sale specialists who can help you navigate the process
If you are considering selling your Minnesota home, but you owe more than it’s worth in today’s market, you are not alone and may qualify for a short sale. A short sale typically occurs when the home’s sale price is insufficient to pay off the total mortgage(s) and the cost of the home sale.
Lenders prefer short sales to foreclosures because they can usually recoup more money from a short sale than a foreclosure. For this reason, a short sale typically does less damage to a homeowner’s credit than a foreclosure. Read more about programs to avoid foreclosure.
What is required for a short sale?
Once a homeowner decides to sell their home as a short sale, their lender must agree to accept a payment that is less than (or “short of”) what the homeowner currently owes on their loan.
While every lender has different requirements, homeowners will generally have to prove:
- Financial hardship
- Their home is worth less than what is currently owed on the mortgage
- Their mortgage is in or near default status
- They do not have assets to pay the difference between the sales price of the home and the remaining mortgage balance
How does a short sale work?
Selling your home as a short sale will resemble a traditional home sale in many ways. The main difference is that your mortgage company (lender) will be involved in each aspect, including:
- Setting a listing price for your home (based on its current market value)
- Reviewing offers
- Approving an offer
- Working with the buyer’s real estate agent and lender to finalize the terms of the sale
While banks are trying to create more efficient ways to approve short sales, most sellers (and short sale buyers) report that getting an offer accepted is the most stressful part of the short sale process.
Get the help you need
While the decision to sell short may be difficult, the process doesn’t have to be. Edina Realty has short sale experts available who can help you navigate the waters with ease. Reach out today to be connected to a Realtor specializing in short sales.
