Sell your home for less than your mortgage (Short Sale):

What is a Short Sale?

A "Short Sale" is a home is sold for less than the amount owed on the mortgage.   The sales price falls "short" of the mortgage amount.   With the historic drop in real estate values over the last few years, many homes are now worth much less than the amount of mortgage.   This makes selling a home almost impossible absent a short sale.   Continuing to own a home that was bought when the market was high can even be a bad investment.

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Why would I want to sell my home on a Short Sale?

If you are having trouble making your mortgage payments and paying for other expenses, a Short Sale may be a better alternative for you then bankruptcy or foreclosure.   A successful short sale may free you from being trapped in a financial nightmare where foreclosure seems like the only option.   A successful Short Sale can help you to wipe out your mortgage debt and move on with your life.   It is certainly one of the things you would want to consider before filing for bankruptcy or allowing your home to be sold at foreclosure.

BEWARE!   If the Bank accepts less then the full amount of your mortgage, the IRS may consider the difference to be "income" to you for which you may have to pay income tax.   The rules about whether it will be considered income are changing rapidly so make sure to speak with your attorney and tax consultant about this before completing a short sale.

The following are some of the benefits to selling your home in a short sale:

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Why would I want to buy a home on a Short Sale?

The only reason to buy a home through a Short Sale is to get it at a lower price.   A large percentage of homes bought in the Bronx within the last five years have mortgages that are higher than the current value of the home.   Without a short sale, these homes cannot be sold.   With a short sale, you may be able to buy the home at or below today's market price.

The downside of a short sale for the buyer is that it can take a long time, often several months, and there is no guarantee that the lender will agree to the Short Sale.   If you have the time and and are willing to take the risk of the deal falling through, you may be able to get your dream home for a fraction of the price.

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Why would a lender agree to a Short Sale?

Not all lenders are willing to approve Short Sales and every lender will have its own requirements for approving one.   Lenders are not in the business to own homes.   In this economy, they may not be able to sell homes at foreclosure for the amount they are owed which would mean that they either have to buy the home at foreclosure for what they are owed or sell it for less than they are owed.   Buying the home means that the lender has to maintain and manage the home while they look to sell.   This can often be like throwing good money after bad especially if house prices continue to drop.   Money that a lender has tied up in a house they cannot sell is money that they do not have to lend.

This does not mean that a lender is willing to give away houses that it owns or that it may have to own after a foreclosure.   But it does mean that lenders are more willing to consider Short Sales in this economy then at any time in the past.

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How do I sell my home on a Short Sale?

Most Short Sales don't start out that way.   Typically you will realize that you need to sell your home and list it for sale "by owner" or through a real estate broker.   The real estate broker may tell you that your asking price is too high or you may not get any offers for several months after listing it for sale.   Or the only offers you get may be well below what you owe on the home plus closing closts.

Completing a Short Sale can be a very frustrating and complicated task.   You will need at least an attorney to complete the sale, so your best option is to get an attoney who has experience with Short Sales.   The same is true of a real estate broker.   Because the bank may ask the real estate broker to cut their commission, always seek out a broker who specializes in short sales or at least has completed a some in the past.

While you can try to get your lender to agree to a Short Sale yourself, it is not easy.   In addition, often the bank and not you will pay for the attorney and real estate broker.   Use the following links for more information on how to do a Short Sale:
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Using an Attorney and/or Real Estate Broker:

Short sales have become so common in this economy that many attorneys and real estate brokers have the experience necessary to help you get your lender to agree to the sale.   If you intend to use an attorney or broker to sell your home and even suspect that you may end up needing to do a Short Sale, you should look for an attorney and broker with short sale experience.   It is not unusual that a lender will require the broker to take a smaller fee than you agreed to when you listed the house.   Brokers who deal with Short Sales will know this and be more willing to agree to the reduced fee to get your listing and a sale.   After all they do not make anything unless they close on your home.

In a normal sale, the seller pays their attorney and the broker's fee.   In a Short Sale the lender may pay the attorney and the broker's fees or it may be calculated in the formula for agreeing to the Short Sale.   While you will normally walk away with nothing from a Short Sale, you certainly don't want to walk away with owing a fee to a Broker.

The following are some questions to ask when considering an attorney or broker:
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Get free counseling:

The U.S. Department of Housing and Urban Development has initiated programs to make counseling available for free to anyone who is having trouble keeping their home.

The following is a list of counselors available in the Bronx and Manhattan.   For a listing of all free counselors in New York go to the HUD counseling webpage.

click on any address for HopStop direction.
Name Address Telephone Website
GREENPATH, INC. 3250 Westchester Ave., Suite 111, Bronx, NY 10461 888-860-4167
NEIGHBORHOOD HOUSING SERVICES OF NORTH BRONX 1178 E. Gun Hill Rd., Bronx, NY 10469 718-881-1180
NEIGHBORHOOD HOUSING SERVICES OF NORTH BRONX 200 E. 161st St., Bronx, NY 10452 718-992-5979
NEW YORK CITY COMMISSION ON HUMAN RIGHTS 1932 Arthur Ave., Suite 203A, Bronx, NY 10457 718-579-6900
ABYSSINIAN DEVELOPMENT CORPORATION 4 W. 125 St., New York, NY 10027 646-442-6545
ASIAN AMERICANS FOR EQUALITY 111 Division St., New York, NY 10002 212-964-2288
ASIAN AMERICANS FOR EQUALITY 108-110 Norfolk St., New York, NY 10002 212-979-8381
GREENPATH, INC. 120 Broadway, Suite 935, New York, NY 10271 888-860-4167
GREENPATH, INC. 250 West 34th St., Suite 2108, New York, NY 10119 888-860-4167
HARLEM COMMUNITY DEVELOPMENT CORPORATION 163 W. 125th St., 17th flr, New York, NY 10027 212-961-4100
HARLEM CONGREGATIONS FOR COMMUNITY IMPROVEMENT 2854 Frederick Douglass Blvd., New York, NY 10039 212-281-4887
NEIGHBORHOOD HOUSING SERVICES OF NYC 307 W. 36th St., 12 flr, New York, NY 10018 212-519-2500
NEIGHBORHOOD HOUSING SERVICES OF NYC 306 W. 37th St., 12th Flr, New York, NY 10018 718-230-0032
NEW YORK CITY COMMISSION ON HUMAN RIGHTS 40 Rector St., 10th Flr, New York, NY 10006 718-657-3138
NEW YORK MORTGAGE COALITION 50 Broad St., Suite 1125, New York, NY 10004 212-742-0762
OPERATION HOPE, INC 2511 Frederick Douglass Blvd., New York, NY 10030 917-477-2800
WEST HARLEM GROUP ASSISTANCE, INC 500 W. 134th St., New York, NY 10031 212-862-1399
WEST HARLEM GROUP ASSISTANCE, INC 1652 Amsterdam Ave., New York, NY 10031 212-862-1399

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Using a Short Sale Agent.

Do an Internet search of "short sale agent" and you will be flooded with ads and claims by all sorts of businesses.   Anytime people find themselves in desparate situtations, there will be a lot of people and businesses looking to take advantage of them.   While you want an attorney and real estate broker with experience in Short Sales, people who call themselves "short sales agents" are not necessarily going to get you a better result.   The following are some tips on getting the right professionals to help you:
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How do I buy a home on a Short Sale?

Buying a home through a Short Sale can save you a lot of money.   Banks recognize that to sell on a Short Sale, they will often have to let the property be sold for less than then current market value and subsequently less than the mortgage amount.   That means that you start off with a house that is worth more than you paid for it right at the closing.   So what's the catch?

The catch is that the process can take a long time, usually at least 3 months and can fall through at any time.