Short Seller’s Top 5 Don’ts
1. Don’t get taken by a scam
Creative scammers have come up with many attractive sounding ways to “help” you avoid foreclosure. If it sounds too good to be true – IT ISN’T! Contact a HUD-certified credit counselor to get the facts before accepting advice, paying anyone or signing an agreement with someone who claims to able to help you avoid foreclosure.
2. Don’t stop maintaining your home
Buyers are comparing your home’s condition with other homes on the market and maintenance problems and cosmetic issues can be a real turn-off. Keep your house clean, and to the extent you can afford it, fix minor issues that detract from your home’s appeal. Most buyers will be looking for a place to live and the better it looks, the more likely they’ll make an offer.
3. Don’t ignore letters from the bank
Your bank is probably Big (that’s with a capital B) and one part of the bank may not know what the other part is doing. If you’re approved for a short sale and you get a notice of foreclosure sale from the bank take it seriously – the two parts of the bank probably aren’t communicating. We’ve heard of San Jose short sales that were near closing being killed by another part of the bank putting the home up for foreclosure auction.
4. Don’t forget your 2nd mortgage
If you’re short selling, it’s probably because your home is worth less than your 1st mortgage balance. Don’t forget that your home equity line bank or 2nd mortgage holder isn’t going to be too happy with getting nothing. You’ll have to negotiate with your 2nd mortgage holder to wipe-out the loan, take a payment of pennies on the dollar at closing (most 1st mortgage holders will allow only $3,000 to the 2nd mortgage holder) or allow you to sign a note for a portion of the balance in return for releasing you from the original mortgage obligation. 2nd mortgage holders may demand you pay 10% of the original loan balance before releasing the lien on the home (if the lien’s not released, the buyer’s not going to buy the home). Also, they may refuse to release you from the loan obligation. Keep in mind the 2nd mortgage holder gets nothing in a foreclosure – that’s your only leverage. If you have a 2nd mortgage, make sure your San Jose real estate agent has been successful negotiating with 2nd mortgage holders.
5. Don’t spend all your money
If you’re short selling, you’re probably having difficulty paying your bills and it’s hard to imagine saving money. But keep in mind that you’ll be moving when the house sells and you’ll need to pay moving expenses and you’ll probably be renting which means 1st and last month’s rent + a security deposit in most cases. If you qualify for a HAFA short sale, you’ll get $3,000 from the closing which will help, but you’ll probably still need more cash to cover expenses when you move.