How does one short sell a house in the midst of a divorce without going crazy or ending up in the poorhouse? I was able to short sell our house within a year of my divorce with zero out-of-pocket cost, all while keeping my sanity.
My disclaimer: I cannot speak for anyone else in this scenario.
After 12 years of marriage, my now ex-husband and I decided to call it quits. Since I had physical custody of our sons, we thought it would be best if I stayed in the house. So he moved out.
I know that this all seems very cordial and well-intentioned, and I recognize that all divorces are not like this, but this one was not so friendly either.
There was anger and hurt, but we cared more about the welfare and the future of our children than we did about ruining each other’s life. Regardless, I'm sure we both secretly wanted the other person to be a little miserable. But we tried to keep these feelings out of our financial decisions.
However, a year later I found myself accepting a job out of state, and he did not want the house. So, we opted to try to short sell our house. A short sale would be better for our credit because the mortgage would just say ‘paid'. A foreclosure, on the other hand, would bring our credit score way down.
Let me start off by explaining what a short sale is, to the best of my ability:
A short sale is defined as selling a home for less than the amount the current owner owes the mortgage company.
We wanted to sell our house, but the current value of the house was less than what we owed. Therefore, we had to ask our lender for permission to waive what we owed on the house after it sold for a lesser amount than our mortgage.
THIS MEANT THAT THE BANK WOULD NOT RECUPERATE ALL OF THE MONEY IT LENT US FOR THE HOUSE.
The Short Sale Process
I began this process by taking the time to interview potential realtors and choosing the one that I felt had the most experience with short sales in my area.
Specifically, I looked at realtors who used legal companies to help with the negotiation process. There are legal firms that focus on negotiations with mortgage companies, and that excel in communicating their requirements and timelines to the seller. This was important for me since I was living states away and was not able to be there in person.
I interviewed four realtors who claimed to be experts in short sales. Then, I chose the one that was able to show a history of success, with no money spent out-of-pocket by the seller.
With a buyer already in line, the negotiations began immediately to short sell the house. The downside of a short sale is that buyers usually do not want to continue to go through the process of waiting as the bank constantly tries to get more money out of them and the seller. The bank will counter-offer the buyer on the sale price. They will also try to make arrangements to get the remaining balance from the buyer.
I had to write numerous rejection letters to the bank stating that I was not in a financial position to pay any of the balance. The process takes patience from all sides.
If the bank gets too pushy with a buyer, that buyer may rescind their offer. If that happens, you're back to square one. In the end, we were able to sell our house for about $25,000 less than what we owed. I walked away with $3,000 cash for relocation expenses.
Under the stress of a divorce, it is important to try to separate emotions from business. This will help both parties make wise decisions. But we all know that this is easier said than done.