A “distressed home” is an owner-occupied property for which the owner is having problems making mortgage payments. Distressed sellers might have plenty of equity in their homes but they usually have cash-flow problems.
A “short sale” is one in which the proceeds of the sale will not be enough to pay off the mortgage. A short seller might have no problem making monthly payments, but the property’s value is not enough to cover paying off the mortgage and the closing costs.
These two situations sometimes overlap but in many cases they don’t, especially when real estate values are generally down. The rights and obligations of sellers vary depending on the circumstances, and there are several steps we recommend for those who are unsure how to proceed:
- Work with a real estate attorney to protect your interests not only in the purchase and sale agreement but also in negotiations with lenders. Real estate agents are not permitted to offer legal advice or help you modify the terms of your loan, so an attorney is a good option for representing you not only in your purchase and sale but also in your negotiation with your lender. Protect your credit and your equity, and don’t get steamrolled.
- Carefully shop for the best rates in title and escrow. It may seem that all the rates are the same, but they aren’t. Wells Fargo Escrow, for example, offers a flat fee that is substantially cheaper than what we have seen advertised elsewhere.
- Minimize your closing costs by using a self service realty program such as MLS4owners.com (shameless plug). The money you save in closing costs can be the difference between being a short sale and just being a sale that isn’t as profitable as you had hoped.
- If you don’t want to take ownership of the homeselling process and prefer to be represented by a real estate agent, let us know and we can refer you to agents who are experienced at working with short sales.
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