A Short Sale refer to a case where a homeowner owes more on his mortgage than his home’s Fair Market Value. In this case when this home is listed and sold, the proceeds of the Sale will NOT generate enough funds to clear all the liens or mortgages against the home. So, the home is underwater or upside down. That’s why Short Sale will require an approval from the Banks who have liens or mortgages against the property. Without these approval, the sale can not conclude.
Short Sale Negotiator will need to work with ALL the lenders who have liens against the home. For example, if a home is only worth $400,000 but the owner has a mortgage balance of $500,000, then he will be $100,000 “short” when the home is sold.
In short, you will need to know the Fair Market Value of your home to determine if you Short Sale will be approved by your lender. In fact, with our Just Sold San Jose Short Sale, we only needed to negotiate with the 2nd position lender since the 1st loan was being paid off in full. And with the rapid rise of home price, the net proceeds might cover ALL your liens.
But you need to engage with a broker/agent to determine the Payoff amounts from each of your loans secured by your properties. These Payoff Demands are official requests from the Title/Escrow include the interest payments based on a projected close date of a sale.
Make certain that your broker refers you to Department of Housing (HUD) counselor who can advise you of all your options. In fact, the lenders involved with your negotiations on the Short Sale will require confirmation that you have discussed all your options with your HUD Counselor. This way you are accomplished one task from the item that will be required. And you would be killing two birds with one stone since your HUD Counselor will explain all your options including Deed in Lieu, Foreclosure and Bankrupcy as well as the Short Sale.
So, talk to a broker.