For all the homeowners who are upside down and can no longer make their mortgage payment (because of either a job loss, divorce, or an option ARM that’s resetting higher), up to now the only option was, well, letting the bank foreclose. That’s not a good option since a foreclosure sticks on your credit record for at least 10 years. But some experts are now advocating a “short sale.” This is a case of a distinction with a difference: If your bank agrees to a short sale, you then hire an agent to find a buyer for the house, you sell the house for a loss, and with the bank’s blessing, they agree to eat the loss (although they could still demand the homeowner make some kind of payment or share the loss).
The experts say you’ll probably need to find a real estate agent willing to work for a smaller commission (which makes the bank a little more willing to absorb the loss), and you’ll also need to scale back your own spending. Putting expensive jewelry on your credit card will make a bank less inclined to do you any favors on the sale of your home. And be prepared that if your bank does absorb the loss, the IRS might treat that as taxable income and you’ll have to come up with the cash to cover the taxes.
Of course, the better option is to find some way to stay in the house or rent the home—by first, seeing if the lender is willing to restructure the loan, or forgo a couple of monthly payments to help you get back on your feet. Apparently, more and more lenders are attempting to make accommodations to avoid taking the property back but it can often take months for the vank to approve a short sale. Banks hate to take over homes, especially in a declining market, so you shouldn’t underestimate the willingness of a bank to make concessions.
Greenpoint Realty’s unique Own my rental program can place a tenant in your property to eliminate the need for a short sale. Give a Greenpoint Realty a call or visit the “Own My Rental” 4-Step Program for Sellers in our Home Owners section to see if this is a good option in your situation.