Is it Possible to Short Sell My House to a Family Member?

In the journey of life, personal circumstances keep changing. At one point you may be doing well only to find yourself facing hardships due to circumstances beyond your control. However, as the famous thinker and author Ralph Waldo Emerson said “What lies behind you and what lies in front of you, pales in comparison to what lies inside of you

Just because you are facing difficulties in servicing your mortgage does not mean that it is the end of your investment life. You can choose to make the best out of a bad situation by considering a short sale for your house. Short selling refers to when you have to sell your house for less than the amount of the mortgage and in the process avoiding foreclosure. The mortgage lender usually agrees to this arrangement because real estate properties that are sold under foreclosure usually fetch much lower prices. Under the circumstances, this is the best option for you to avoid foreclosure which is bad for your credit rating.

Can you short sell to your family member?

When it comes to conducting the short selling process, lenders usually prefer that you conduct the sale on an arm's length transaction. This means that your family member is not supposed to be the recipient of the shortsale process and you should not have any relationship with the ultimate buyer. If a lender discovers that the buyer of the house is a family member, they may cancel the arrangement. However, should there be an investor willing to put up the money on behalf of your relative, the lender may take the risk and agree to the deal.

Why short selling is better than a foreclosure

Due to many foreclosures happening in the real estate industry, there have been concerns about unethical practices such as fraud. When you opt for the short selling option, you take control of the process and avoid the possibility of such occurrences.

Another benefit from short selling your house is the fact that you sell it while you are still a resident. This means that the house is sold by your agent while it is still in good condition. Foreclosure houses usually sell at a lower price due to the deterioration that comes with the owners being forced to vacate them.

The Shortsale Process

The first step to short selling your house is getting your mortgage lender to agree to the arrangement. This is because when they accept the deal, it means they will receive less money than the value of the balance on the mortgage. If you prove to them that your financial circumstances have completely changed, they will see the logic of getting a good part of the balance as opposed to going to foreclosure. Lenders understand that the foreclosure process is expensive and they may end up selling the house for a lower amount. The mortgage lender will then accept to waive the outstanding balance on the home loan after receiving the amount of money that you fetch from the short sell.

If you know that you have no chance of repaying your mortgage, attempting a the shortsale of your home might be right for you. Short selling is a better alternative than waiting for the bank to foreclose on your property.