Expert: Jay Denit - 11/6/2009

Question
Hi. I am hoping you can help me with some questions. We are currently trying to sell our house and we have to do a short sale because it is appraised at over $50,000 less than what we bought it for.  We would prefer not to even sell our house right now but my husband is in the military and he is due to transfer out next summer.

Anyway our house has been on the market for almost a month now and we have not had even one person come to look. I am thinking the problem is that when people find out it is a short sale, they will not even bother coming to look because they know short sales can take a really long time. So that is one problem we are having... The other is that we dont even know for sure that we will be able to get a short sale approved.. Our bank has just told us that we have to wait until we have a buyer and then submit the paperwork for a short sale.

Also, I am hearing that you are not likely to get a short sale approved if you are not having major financial problems. We are doing ok, my husband is very good with budgeting our money.. Our mortgate payments are on time and we dont have outstanding bills. So we are wondering if we would even qualify for a short sale in the first place.. Unfortunately we cant get any info from the bank about if we would or not, so this is a really frustrating situation.. This is why I am trying to find out what would be the best next step for us. Should we just wait until we get a buyer (if we ever do) and then just hope we get a short sale? Or is there anything else we can do right now to help ensure that a short sale would be approved?

This is a really tough situation and I am not quite sure what to do next.  I would like to rent out our house but my husband doesnt like the idea at all since we would be living out of state and would probably lose a couple of hundred dollars a month, especially since we would need to get a property management company..  

So, if you have any advice for us on the short sale situation, I would really appreciate it. Thanks so much for your time!!

Jennifer

Answer
Hi Jennifer,

So sorry for your tough situation.  Declining property values have really put a squeeze on the people that have to move and I wish there was an easy answer.

You are correct on just about all accounts. Buyers do tend to shy away from properties listed as short sales because of the length of time they can take to close and that's IF the lender decides that want to approve it.  I have been in situations where the lender will string a contract offer along for 3 months and then decline the offer from the buyer.

You are also correct in that it is tougher to get a short sale approved if your personal financial situation is not in shambles.  The first step in getting your short sale approved will be sending over your last 2 years tax returns to the lender, so they can make a judgment of whether or not you can "afford" to continue making the payments.  Until you start missing mortgage payments you and your husband are still considered performing assets to the lender and they are happy to have you keep paying them.

And yes, the lender won't give you any information about a possible short sale because until the home is under contract for less than is owed it's not technically a short sale.

I wish there was a silver bullet answer I could give you, but it sounds like you are on top of exploring all of your options.  

I would just recommend trying to get an offer on your place and go from there.  If it's on the market for a while and your not seeing any favorable feedback from the showings, it might be time to consider renting it.  Executing a short sale will damage your credit scores significantly, so keep that in mind as you move on and try to find financing for a home in the next town.

Best of luck to you and your husband!