The Big Short: When Should You Consider a Short Sale?

Let’s face it: mortgage note holders don’t have a lot of patience. If you’re behind on your mortgage payments for more than three months, most mortgage companies are not going to sing Kumbaya.

That’s why, if you know that your income will not be sufficient to make the house payments going forward, it may be time to consider a short sale on your home lickety split. A short sale can help you avoid foreclosure and salvage your credit rating while still letting you liberate yourself from your home loan.

Trouble is, homeowners often wait until they receive a notice of foreclosure from the lender before starting the short sale process. In some cases, it’s already too late. I grabbed our short sale experts, Nicole Espinosa and Catherine Aliaga DFW Short Sale Experts, whom we have chatted with previously. We asked Nicole and Catherine for their very best advice to clients:

NE:  If you face financial hardship and know you will default on your loan, start thinking about a short sale right away. You can always stop the process if your financial situation turns around for the better, but if you wait too long to start, you could miss the window of opportunity.

CD: When do foreclosure auctions take place?

NE: In Texas, foreclosure auctions take place the first Tuesday of every month. After sending several demand letters (usually at least 2 or 3), the bank will send a foreclosure notice to a homeowner 21 days before the auction date.

A short sale takes time—often several months. There is a possibility we can still save the house (and the credit rating) within two weeks of foreclosure, but the shorter amount of time we have, the less likely the chance to sell the house rapidly and avoid the process altogether.

CD: So it’s critical to get going fast. How long before the bank starts their engine?

NE: In general, a lender will start the foreclosure process after you are 60 to 90 days late on payments. Some lenders take longer, but just because you don’t hear from the bank doesn’t mean they have forgotten you. If you don’t pay your mortgage, the lender will send you a foreclosure notice in due time.

CD: Is there any notice?

CA: You will usually receive at least one demand letter from the bank telling you the amount that you owe (plus interest and fees) and the date by which you must catch up on missed payments. The best course of action is to call a Realtor who specializes in short sales, (like us!) as soon as you receive the first demand letter. That way we can explore the option of a short sale.

CD: What if you don’t pay…

CA: If you fail to pay by the date specified in the letter, the bank will send another demand letter for the full amount of the note, due immediately. Finally, the lender will send a public notice of default with the foreclosure auction date via certified mail.

NE: Too many families have lost their homes to foreclosure because they didn’t know they had other options. Don’t let that happen to you. If you are behind on your payments—and especially if you have received a demand letter or notice of foreclosure—take action immediately.

CD: NOW!