A short sale is not the big red flag it used to be. It's not like a Scarlet Letter hanging around your neck. Short sales are so common place that almost everybody knows somebody who has done a short sale. They are not a horrible thing like a foreclosure. Doing a short sale means taking responsibility, and most people who rent homes our prefer to rent to responsible tenants.
If the only derogatory mark on your credit report was caused by a short sale, that derogatory credit is explainable. And remember, after 2 years, most credit is re-established to the point that sellers can qualify for a Fannie Mae loan to buy another home.
Reasons to Occupy Your Home During a Short Sale
My advice to sellers is to stay put during the short sale. Don't move. Although you may be eager to get on with your life, turn the next page and put all of this behind you, there are good reasons to stay in your home.
- Vacant homes are often vandalized. Just because you are short selling doesn't mean you are not responsible for your home. You are responsible for your home all the way to the day it closes. That means if some thuglette breaks in to rip out the copper plumbing and floods the place, that loss is your loss.
Moreover, bear in mind that many homes are not insured after 30 days of vacancy. Check your homeowner insurance policy. Purchasing vacant home insurance is expensive.
- Vacant homes still require maintenance. You can't let the lawn die or stop mowing the lawn. If neighbors call a government entity to complain and that entity steps in to take care of your lawn, that entity will most likely file a lien. A lien that your bank will most likely refuse to allow you to pay, and then the home could go to foreclosure.
It's easier to care for the home if you are still living there.
- You're living rent free. If you have stopped making mortgage payments, it's not costing you anything to stay in the home. You may as well stay there as long as you can and continue to save for a security deposit and first / last month's rent.
- Some banks require occupancy. The last thing you need to hear is your short sale was declined because you moved out. I've had short sales rejected by banks because the home was vacant and the investor guidelines required occupancy. Don't think you can just say you live there when you don't because banks will ask for a copy of your cable bill.
- Your homes shows better with furniture. There is only so much a short sale agent can do to shoot a photograph of an empty bedroom. A corner with a window is the most unappealing shot. Your home will sell faster and attract more committed buyers if you do not move out.
Moreover, if the purchase offer contains a contingency, the buyer might still cancel. To be really cautious, you might want to wait until all of the contract contingencies are removed. Otherwise, you could find yourself moving out only to turn around and have to move back in. Your short sale agent should be able to guide you.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.