Research Options On Short Sales

Q: I can’t afford the payments on my house anymore and I’m trying to sell it, but it’s going to have to be as a short sale. Are there any programs out there I should know about?

A: I’m sorry to hear you’re in this situation. I know it’s painful to have to sell your house in this market, especially when you’re having financial trouble and don’t have a lot of options. However, you’re already being your own advocate by asking about available programs. You’ll have to do some research to find out if there’s anything that will work for you, but you do have a few options when doing a short sale.

(For those unfamiliar with the term, a short sale is “any sale of real estate that generates proceeds that are less than the amount owed on the property,” according to Investopedia.

First of all, talk to your Realtor and find out what programs he or she knows about. But don’t stop there. Your Realtor might be expert at selling houses, but that doesn’t mean he or she knows the ins and outs of all the programs. Each bank functions differently and you might want to talk to them directly and see what’s available. Some banks have their own short sale programs that can help you and others just use the government programs and “conventional” short sales. One such government program is called the Home Affordable Foreclosure Alternatives (HAFA) Program.

A HAFA short sale helps you mitigate the damage a short sale does to your finances and credit. For example, if approved, you won’t have to pay back the deficit between what you owe and what the bank is able to net on the sale of your house. (This is only sometimes required by the banks.) It’s also less damaging to your credit score, and you might even receive funds to help you relocate. It’s a great program, but there are lots of requirements and many of those are not published on the government website. (Visit www.makinghomeaffordable.gov for information.) That’s why it’s critical you talk to a HUD (U.S. Department of Housing and Urban Development) approved counselor and also talk to your bank about their specific requirements.

Some questions you might want to ask are:

♦ Do I have to have missed payments to be eligible?

♦ Do I have to still live in the house and if not, how long ago can I have moved?

♦ Do I need an offer to apply for the program or should I apply right away?

♦ What documentation do you need?

Add your own questions and make sure you understand the process before you apply. One missed step could mean being rejected for the program. If that happens, it’s still better on your credit to do a short sale over a foreclosure or a deed in lieu of foreclosure. But if you can get some help, then it’s certainly worth pursuing. And remember, your Realtor might help you with this, but these are your finances at stake. Make sure you’re being proactive and involved. You’re the one who is going to have to live with the results.

Talia Freedman is a Realtor with Signature Southwest Properties