If you can no longer afford the monthly mortgage payments on your commercial property and have negative equity, you can consider a short sale.
Short sale is a process of selling a distressed property at a price that is less than the outstanding mortgage balance and paying the sale proceeds to the lender as repayment of a portion of the balance. There are also other ways to avoid a foreclosure like deed-in-lieu of foreclosure and forbearance plan.
You can come to know about all these alternative options by going through mortgage glossary and get the meaning of certain mortgage term.
How can you do a short sale?
Some of the steps involved in a short sale are:
· Appraise your property: You must do an appraisal of the commercial property to verify the amount you can get by selling it. Appraisal is one of the popular mortgage terms. It refers to estimation of the market value of a property and can help you find a prospective buyer.
· Compare market value with loan balance: Compare the market value of your property with the outstanding mortgage balance and calculate the deficient amount. Your lender may require you to pay this deficient amount (the remaining balance on the loan). However, you can also negotiate with your lender to reduce the remaining balance.
· Calculate all costs: You should calculate all the cost involved in selling the commercial property including closing costs and also the realtor's fee if you have hired one.
· Explain your situation to lender: Contact your lender and explain him the financial hardship you are facing. Also inform him the estimated value of your property and ask him whether he will allow you do a short sale.
· Sell the property: Search for a prospective buyer. Commercial properties are generally more profitable than residential ones and real estate investors are normally eager to purchase these properties.
As soon as your lender allows you to sell the property for the price that a buyer has offered, sell the property and give the sale proceeds to your lender. Short sale will help you repay your mortgage without undergoing the long and tiring procedures involved in a foreclosure.
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