Short sales, where the lender agrees to take less than amount due to them, have tended to sell for less than similar homes in the area. One reason for this is that short-sale listings usually don’t look as good as the competition. Another reason is that short sales require lender approval.

Last year, lenders often took three to six months to respond to a short-sale offer. If the response was no, the buyer was out looking for another home after having wasted a lot of time. Many buyers who expected short sales to be good deals shied away from them altogether after having a few bad experiences.

Short sales, where the lender agrees to take less than amount due to them, have tended to sell for less than similar homes in the area. One reason for this is that short-sale listings usually don’t look as good as the competition. Another reason is that short sales require lender approval.

Last year, lenders often took three to six months to respond to a short-sale offer. If the response was no, the buyer was out looking for another home after having wasted a lot of time. Many buyers who expected short sales to be good deals shied away from them altogether after having a few bad experiences.

Subsequently, the Obama administration put pressure on lenders to do more short sales and fewer foreclosures. Now a process that was laborious is much easier to navigate.

Before you put your house on the market, contact your lender or lenders to let them know you can no longer afford to keep the house and you will be selling it. Also tell your lender that due to the decline in property values in your area, you may not be able to sell for enough to pay off the mortgage.

HOUSE HUNTING TIP: Lenders usually won’t work on a short sale until there is an accepted offer on the property. But doing a little ground work with your lender(s) can assist the process. Find out how long it will take them to process a short sale. This kind of information will be important to a prospective buyer. If buyers know they can expect a response from the lender in 30 to 45 days and not four to six months, they’ll be more inclined to make an offer.

Try to work out a loan modification with your lender before you put your house on the market. If your lender agrees to lower the loan amount, your listing will be more attractive to buyers because the lender won’t have to take as large a shortfall in order to approve the sale. …CONTINUED

Most lenders won’t allow credits from seller to buyer in a short-sale transaction. It’s a good idea to have presale inspections done before you put your house on the market. The more information a buyer has about the property before an offer is made the better the chance that you won’t end up in a situation where the buyer discovers defects that weren’t previously disclosed and wants credits as compensation.

In most cases, it’s worthwhile to make your house look as good as possible before putting it on the market. This will bring you a higher price, which reduces the amount you are short. This will make it easier for the lender to approve the sale.

You’ll need broad marketing exposure to attract a wide range of buyers. It’s important to hire an agent who is willing to put the time and effort in both marketing your property and dealing with your lenders. Your agent should be a good communicator who will keep all of the parties informed about the status of the sale.

It’s important to consult with your attorney and accountant to review any documents that the lender requires before closing the transaction. Some lenders will require the seller to pay back the amount that the seller is short. A seller does not need to agree, but this could cause the transaction to fall apart.

You could owe tax on the amount of money the lender forgave, though the Internal Revenue Service does offer tax relief for those who lose their homes through foreclosure or short sales between 2007 and 2012.

It takes a lot of patience with him and perseverance to get through a short-sale transaction. However, a short sale might negatively impact your credit for two to three years; it would be five to seven years if you let the property go to foreclosure.

THE CLOSING: If possible, try to negotiate with the lender to salvage your good credit.

Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of "House Hunting: The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer’s Guide."

***

What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
The best event in real estate kicks off next week! Tickets are selling quickly.Register Now×
Limited time: Get 30 days of Inman Select for $5.SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription