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If a house is underwater financially or extremely distressed it may cost you more money to fix the problem than the house is worth. In this case it may be to your advantage to consider a short sale of the property.

Let’s go over exactly what a short sell is, in terms of real estate.

Let’s say, for example, you have a mortgage on your property, and the mortgage balance is currently $100,000. Maybe, over time, the house becomes dilapidated because no one is living in it or you’ve been behind on your repairs. Maybe the roof caved in or something else happened to the property, and the value actually goes down. This is when you might consider a short sale.

So what, exactly, is a short sale?

Now, for the sake of argument, let’s say the value value on the property is only $80,000. This is what an investor, someone like us, would be willing to pay for it. If we paid any more, with all the repairs we have to do, holding costs, paying utilities, insurance and taxes on it for a few months then selling to someone else, we would never make a profit on the house – and we are a for profit business. A buyer would not be willing to pay more than the $80,000 value of the home.

This means you can’t sell your house, because you know that you’d have to come up with the 20 grand difference there to pay off your mortgage balance. The lender is not going to sell it unless they approve a short sell. In other words the lender can allow you to sell your house for less than what you owe.

Go to the mortgage company, or the person holding your mortgage, like Wells Fargo, Bancorp South, Citibank or whoever it is here locally. You have been paying 600 or 1,000 bucks a month for the past few years, and hopefully you have built a good relationship with them. You can talk to them and see if they would consider selling less than the mortgage value. This is a short sale.

How do you initiate a short sale?

You could go to your mortgage holder and say something like, “Hey, I’ve been trying to sell this for $105,000 or $120,000, and though I’ve had it there for a few months and I actually cannot sell it for more than $100,000. Actually the best offer I’ve gotten is only $80,000. Mr. Lender, I am in financial trouble.”

More often than not a lender will be more inclined to sell for less if you’re in financial trouble and for some reason aren’t paying your mortgage or are behind in payments. This is something you definitely need to do before any foreclosure process begins.

If you can go to your lender and show him that a potential buyer is willing to make a short sale offer of $80,000 for this property there is a good chance you can get a short sale approved for that amount. You just have to communicate with them and show them that there’s an offer on the house for that amount. In reality they are not going to get more than the value of the house if they resell it, and if you have an offer already you have done the work for them.

How long does it take?

It could take anywhere from a couple of weeks to a couple of months for a lender to approve that short sale but it will get you out from under the house and keep you out of foreclosure. A foreclosure stays on your credit report for about seven years. While a short sell it isn’t a great thing to show up on your credit, it is not as bad as a foreclosure.

I’m not a tax advisor or a financial consultant, but what I’ve learned from dealing with many tax professionals, is having a short sale on your credit record isn’t quite as bad as a foreclosure. A foreclosure could mean you simply walked away from your obligations, but a short sale indicates you at least made an effort to make your mortgage payments.

So that’s kind of the short sale process and what a short sale is. We have bought many properties that were short sales. This was VERY common in the 2008 real estate market crash. People were buying houses at full market value and then prices dropped 10%, 20%, 30%. There were a lot of short sales in real estate then, but it still happens today. The reasons are different, usually due to unforeseen circumstances that are simply out of the owners control.

How We Buy Houses can help.

We Buy Houses, Memphis helps people by buying their property and being able to do this at a decent price. Getting a reasonable offer from a buyer with a solid reputation may be something the lender would consider in making their decision about a short sale.

If the bank forecloses on a property it will go up for auction and there is no telling what the house will ultimately sell for. We can take on the property at the near current value, fix it up and sell it. In the process we not only improve the condition of the house but we add value to the neighborhood.

The most important thing is to communicate with your lender. Make sure they are aware of your current situation and your willingness to work to make things work out best for everyone involved.

So there you go, guys. That’s what a short sell is. Hopefully this helps.

We Buy Houses Memphis buys hundreds of houses each year in Memphis, Tennessee. We purchased 250 homes last year. In 2020 we are on track to buying even more. We’re your “go to” place to find options to help you sell your house fast, for a discount or if you’re having some sort of difficulty.

Call Us At 901-250-0100