The “Should I Short Sale” Chart
One question that I hear over and over again is, “should I short sale my house?”
Before you can short sale your home, you need to know if your house is under water. If you’re asking the above question, you probably already know the answer. If you don’t, you might want an evaluation of your property to determine where it may stand in the marketplace.
The “counter” question to “should I short sale” is: Well, if you keep doing what you’re doing now, will you eventually run out of money, fall behind, and be forced to foreclose?
If the answer is yes, then it’s time to get your house on the market. This simple chart gives you a visual representation of what’s happening in the financial life of someone who is headed for foreclosure. Where you fall on this chart will depend on your personal circumstances. For this example, our home owner has $20,000 in savings, a monthly income of $5,000, and monthly expenses of $6,000. The monthly deficit is $1,000, which will slowly drain their savings over time, until they finally run out of savings and start falling behind.
You’ll see that in the chart, the home owner has 20 months before they run out of money, 90 days before the bank files the trustee sale notice, and another 91 days (Arizona) before the house goes to auction. The earlier you start the process, the better it will be. If you have no prospect of increased income, whereby you can flatten that blue area or tilt it the opposite way, and you have clearly determined where you red dot is on your timeline, then you know when you need to sell.
Don’t wait until you’re at zero to make that decision. Get the house on the market and get an offer. When you have an offer, it can delay the timeline and give you more breathing room.