Drop It And Sell It
Dave tells Sarah how to work a short sale in order to survive buying a house that was too big.
QUESTION: Sarah and her husband bought a house that was too big, and half their income goes to housing costs. They have been trying to sell it for 4 months at $380,000, but have not had any lookers. It might sell for about $340,000. The answer, Dave says, involves a lower price and a short sale.
ANSWER: You have to drop the price to attract a buyer. If you get an offer, then take it to your mortgage company and go for a short sale. There are 2 types of short sale; one where you make up the difference and one where they forgive the difference. The problem is that when you make a mess, it doesn’t clean up instantly. Keep lowering the price until you get an offer. If you get the mortgage company to take the offer, that’s good. The problem is that if you can’t, you’ll have to hang onto the house for a little while.
The problem with the house being half of your take-home pay is not that you can’t survive, it’s that you can’t get any traction. You may end up having to tread water on this for a little while. If you end up with $100,000 loan because you sold this house for $280,000, you could have paid $3,500 a month for a long time and not done that. You’re better off if you pay the difference. If the mortgage company will take what you offer them, then we’ll do that deal today. Cut the price and get a buyer in there.