There’s no easy answer to that question. But certainly, most people don’t consider the full implications of pursuing a short sale, so just by doing your research you’re on the right track to an answer you can be comfortable with!
When a homeowner finds themselves underwater and unable to make payments, there are no easy answers. But, depending on your situation, some options ARE better than others.
First you need to think about whether your debt problems could be solved by getting rid of your home--in other words, do you have so much debt that even if your mortgage payment were less, you would still have trouble staying afloat? If so, you might want to explore bankruptcy.
You also need to be aware of the potentially large tax implications of a short sale. Even if the bank forgives your debt, that forgiveness, under certain circumstances, is considered ‘income’ and can create yet another large liability for you.
Do you have other liquid assets? If you do, chances are a bank will look less kindly on your request for a short sale. You might, in some cases, be better off letting a home go to foreclosure.
All of these options, of course, have an impact on your credit rating. (Read more about the impact of a short sale on your credit here.)
The decision of whether or not to pursue a short sale is neither a simple nor an easy one. The implications are long lasting and serious. They are a lot of work and heartache, and then most short sales don’t ever even get to closing! (Read more about why short sales don’t close here.)
However, there ARE ways that you can help maximize your chances of being one of the few that successfully close.
The most important thing you can do is use an agent who has appropriate training in short sale transactions. Every day new processes and systems are evolving. The Home Rescue Institute boasts a 95%+ close record for short sales accepted into the program. They achieve this by closely controlling the offer process and negotiating with the bank on a seller’s behalf. The Home Rescue Institute brings together real estate agents, professional negotiators, settlement companies, and a legal team to represent the seller. There’s no reason for a seller to go through the process alone, and it’s critical to have a team of experts–not a sole real estate agent trying to ‘do it all.’ The process is simply too complex and the skill sets too diverse.
Katie Wethman, CPA, MBA, is Managing Director of the Wethman Group at Keller Williams Realty, and a Certified Home Rescue Expert. If you’re considering a short sale of your Falls Church, Arlington, or Northern Virginia home please contact us for a confidential counseling appointment about the impacts of short sales, foreclosures, and bankruptcy.