Should You Stop Paying Your Mortgage to do a Short Sale?

Should You Stop Paying Your Mortgage to do a Short Sale?

The number one question I get asked by every homeowner that calls in and inquires about selling their home as a short sale is “Should I stop paying my mortgage?” 

This is a very difficult question to answer, so I don’t answer it, nor do I believe if you are a real estate agent should you answer it as it opens you up to liability. My simple response is as follows, “I cannot answer whether or not you should stop paying your mortgage. This is a question I refer to the attorney who will work on your case, but the question I ask you back in return is, are you going to see this money back when you sell your property?

Remember a short sale has NEGATIVE EQUITY, so any payments a homeownershould you stop paying your mortgage makes, will not be seen back when my homeowner sells, unlike when a property is sold traditionally and it has equity.  Any payment made to the mortgage will be seen back at closing.  For example;  On a traditional home, let’s say I have equity in my personal property. If I go to sell my property and I sell my property for $300,000 and I only owe $100,000, well then there’s $200,000 equity. If I make my mortgage payment of $2,000, that’s going to reduce my principal payment. I’m going to see that money back at closing.

So, what is a short sale? A short sale is the sale of a negative-equity property. If you pay your mortgage on a short sale, are you going to see that money back at closing? 99.99% of the time the answer is, NO. You will not see that money back. So for example, let’s say I owe $350,000, and the value of my property is $250,000, and the short sale lender takes $250,000 as their payoff.  Any payments you owe will go towards the $100,000 you owe, and because you owe more than the value is worth, you will likely see no money back at closing. 

Of course, there ARE situations, where we have been able to get 3K – $22,000 in a “moving incentive” or “short sale incentive” but those days are almost long over.

So, if you’re a homeowner and you say to me, “Should I continue to pay my mortgage?” My answer is, “I can’t answer that question but will you see that money back?


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