There are five key factors to consider in determining if a short sale is the right strategy for DFW homeowners: equity, house value, the homeowner’s individual financial situation, the lender’s flexibility, and impending foreclosure.
1. Length of ownership: Seven years is generally the tipping point. Until then, the homeowner probably hasn’t built up sufficient equity to pursue a traditional sale. With the value of the house below the mortgage amount, a short sale is the best option. But if the homeowner has refinanced within the past few years – even if he or she owned the house longer than seven years – they will also likely be upside down and require a short sale.
2. Current house value: Over the last three to four years, housing prices have declined drastically, and they are expected to continue this downward trend until 2012. The decline in housing values has wiped out the equity of many homeowners even for those that have owned the house for 10+ years. If the value of the house has declined below the amount owed a short sale may be the only option if a homeowner needs to sell the house.
3. The homeowner’s individual situation: Job loss, divorce, death of a spouse, illness, bankruptcy, etc., often lead to a homeowner being unable to pay the mortgage. If they don’t have money in the bank and don’t have means to borrow money, a short sale may allow them to legally get out from under their mortgage with minimal credit damage.
4. Lenders must agree to a short sale: A short sale must be negotiated with the lender, which takes time and skill to accomplish. Large lenders tend to be the most agreeable to short sales, yet this is changing as more lenders are willing to sell for a smaller loss through a short sale than risk a foreclosure, which can take months or years to recoup the loss. Homeowners need to retain a skilled and experienced short sale real estate agent capability of negotiating with the lender. This isn’t something homeowners can do on their own.
5. Act early: To successfully negotiate a short sale, real estate agents specializing in short sales need four to six weeks lead time before a pending foreclosure to successfully conduct negotiations with the lender and get the house on the market. It’s critical to take action as early as possible. If a foreclosure is only days away, it is too late.
For homeowners who fit the criteria, a short sale is a viable alternative to foreclosure. If you are a homeowner worried about foreclosure, consider these five factors when contemplating a short sale in Dallas, then contact an experienced DFW short sale expert to get the process started.