Facing financial hardship and struggling to keep up with mortgage payments can be overwhelming. One potential solution to consider is a short sale. This article will guide you through the intricacies of Washington short sales, helping you determine if it’s the right choice for your situation.
Understanding Short Sales
A short sale occurs when a homeowner sells their property for less than the outstanding mortgage balance. The lender agrees to accept the proceeds as full payment, preventing foreclosure. While this might seem like a drastic measure, it can be a strategic way to regain financial control, however you do need to have a lender who is willing to work with you and generally have to show a hardship as to why you cannot pay the full balance owed.
Short Sale vs. Foreclosure: Weighing Your Options
Understanding the stark differences between a short sale and foreclosure is crucial:
Short Sale:
- Negotiated process with the lender
- Potential to avoid foreclosure
- Less severe impact on credit score compared to foreclosure
- Requires lender approval
Foreclosure:
- Legal process initiated by the lender
- Results in loss of property
- Severe negative impact on credit score and ability to qualify for a home loan in the future
- Can lead to a deficiency judgment (you may still owe the difference between the sale price and the mortgage amount) if debt is on a non primary home or 2nd mortgage
Is a Washington Short Sale Right for You?
While a short sale can offer relief, it’s not a one-size-fits-all solution. Consider these factors before making a decision:
- Financial Situation: Assess your ability to make mortgage payments and determine if you can catch up on missed payments.
- Equity: If you have significant equity in your home, a short sale will not be an option
- Credit Score: Understand the potential impact of a short sale on your credit score.
- Lender’s Requirements: Each lender has specific criteria for approving short sales.
Steps Involved in a Washington Short Sale
Navigating the short sale process can be complex, but understanding the steps can help you navigate it more effectively:
- Contact a Real Estate Agent: An experienced agent specializing in Washington short sales can guide you through the process.
- Financial Evaluation: Your agent will assess your financial situation to determine if a short sale is the best option.
- Making the Offer: Your agent will negotiate with potential buyers and submit offers to the lender.
- Lender Approval: The lender reviews the offer and determines if it’s acceptable. This process can be time-consuming and many financial documents need to be provided.
- Closing the Sale: Once the lender approves the short sale, the property is sold, and the proceeds are distributed to the mortgage lender and other creditors.
The Impact of a Washington Short Sale on Your Credit
A short sale will undoubtedly affect your credit score, but the impact is generally less severe than a foreclosure. However, it’s important to note that it will remain on your credit report for seven years.
Seeking Professional Help
Navigating the short sale process can be overwhelming. Consulting with a qualified real estate agent and financial advisor can provide valuable guidance and support.
Washington State Specifics
Washington state has unique laws and regulations regarding short sales. It’s crucial to consult with professionals who understand these nuances. Key points to consider include:
- Non-Recourse State: Washington is a non-recourse state, meaning lenders generally cannot pursue a deficiency judgment on a first mortgage. Typically a waiver of remaining debt can also be signed as part of the short sale process with other lenders.
- Lender Requirements: Different lenders have varying criteria for approving short sales.
- Real Estate Agent Qualifications: In Washington, real estate agents must have specific licenses or endorsements to handle short sales effectively.
Understanding the Hardship Letter
A crucial component of the short sale process is the hardship letter. This document outlines your financial difficulties and explains why you are unable to continue making mortgage payments. The hardship letter should be persuasive and clearly demonstrate your financial hardship.
Potential Alternatives to a Washington Short Sale
While a short sale might be a viable option, it’s essential to explore all available alternatives. Here are some possibilities:
- Loan Modification: Contact your lender to discuss modifying the terms of your mortgage, such as lowering your interest rate or extending the loan term.
- Forbearance or forbearance plan: This allows you to temporarily suspend or reduce your mortgage payments for a specified period.
- Home Equity Line of Credit (HELOC): If you have equity in your home, a HELOC can provide temporary financial relief, but it’s essential to use it responsibly.
- Selling the Home Yourself: If you have time and resources, selling your home through traditional means might be an option, but all liens would need to be paid off unless buyer is willing to purchase the property subject to the liens.
Conclusion
Deciding whether to short sell your Washington home is a significant decision with far-reaching consequences. Understanding the process, your options, and the potential impact on your financial situation is crucial. Consulting with professionals who specialize in short sales can provide the guidance you need to make informed decisions. Remember, while a short sale might be a viable option for some, it’s not a one-size-fits-all solution.
For further assistance or personalized advice, give Symmes Law Group a call at 206-682-7975 to schedule your consultation today!
