Are You Ready to Do a Short Sale?

Not every seller is ready to do a short sale. You would think that by the time a seller puts her home on the market that she’s thought through the process, but sometimes not. Sellers can get cold feet or have a change of heart; it’s known as seller’s remorse and it’s not always the seller’s fault. Sometimes, it takes listing a home as a Sacramento short sale before a family member will offer to help.

The trouble with that is sometimes the help offered by family is not much more than a BandAid. The help can be temporary assistance or it can mask the present situation without offering a long-term solution. A permanent solution is to reduce your principal balance. If a financial alternative doesn’t accomplish that, it’s not really an alternative. In those types of situations, a seller is often putting the gun to her head — just not pulling the trigger until later.

As a Sacramento short sale agent, I’ve represented sellers who have changed their minds about selling as a short sale. It can happen within minutes of going on the market, all the way to short sale approval and beyond. That’s why it’s important to talk through a short sale with a seller. Still, even then, a seller can do a 180. Selling is an emotional business. Any agent who has been in real estate for a decade or two can attest to that. Making sure a seller understands that doing a short sale involves selling the home is one of my first qualifiers when a potential client calls me.

A few weeks back a seller told me her parents offered her financial help. They were willing to supplement her mortgage payment and give her money to help pay that mortgage payment every month. She asked if she could cancel her short sale. I looked at her file. She had originally paid, oh, let’s say $700,000. She had put down $300,000 in cash. The problem was her mortgage balance was about $400,000 and her home was worth about $200,000.

I asked if she wanted to throw good money after bad. She had already lost $300,000. If her parents were willing to help her make mortgage payments, why didn’t she let them help her buy a new house worth $200,000, and she could make her own mortgage payments? Because she can afford payments on a $200,000 home. She can’t afford payments on a $400,000 home. Her home is not worth $400,000. It’s worth $200,000. So why doesn’t she just buy a $200,000 home?

This had never occurred to her. It hadn’t occurred to her parents, either. But that sounded like an excellent idea. That’s because it is an excellent idea. Buying a home in a down market makes sense. Interest rates are exceptionally low as well, we’re at historic 60-year lows right now, less than 4%. You don’t just have to sell your home as a short sale, you can buy a new home as well if somebody else can qualify for your loan. You might not have to wait to buy a home.

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