In Today's Real Estate market, many home owners owe more than they can net by selling their home. Home prices in Cache Valley have dropped over the last year, and substantially in some price ranges. Selling "Short" or a Short Sale, is one way where sellers can sell a property when they are upside down. In a "Short Sale" the bank accepts less than what is actually owed on the property.

Short Sales are not a magical fix to get out of a regretful real estate purchase. Banks are willing to allow short sales if and when it is a better scenario for them than allowing a foreclosure. Banks will usually not approve a short sale unless the seller has had a legitimate hardship, and lacks means of paying back the mortgage loan.

Although short sales can occasionally be bargains, banks aren't likely to approve a short sale unless it is close to market value.

Qualifying for a Short Sale

Banks will usually only allow sellers to qualify if they have had a legitimate hardship such as Job Loss, Death, or Divorce, that substantially alters ones ability to pay. They also tend to favor owner occupied properties, and are generally easier when the seller pays for Mortgage Insurance.

Second and Third Mortgages must agree to settle for a fraction of what is owed before the primary mortgage is willing to negotiate. These secondary liens will often request that the deficient amount still be paid back as a "personal" loan rather than a lien tied to the property.

Documents You'll Need to get Short Sale Approved:

Missed Mortgage Payments - (Most banks won't approve a short sale if you are current on your payments)

• Two Years of Tax Statements
• Two Months of Bank Statements
• Paycheck Stubs
• Hardship Letter
  

Disadvantages of Short Sales

Although a short sales are less damaging on credit, they definitely don't help. The amount shorted is also considered as taxable income, and may effect your tax return. Ask a qualified financial person for real details.

Common Short Sale Obstacles

The biggest obstacle I have faced when dealing with short sales is that they can be very time consuming. The loss mitigation departments at most banks is overwhelmed with short sale requests. Sometimes it takes months just for them to get to the file. The most frustrating thing is that banks won't review the file until there is an accepted offer. If a property is priced low enough to get an immediate offer, it often won't be accepted.