Many people ask me when attempting a short sale here in San Diego whether they should Short Sale Move Out Or Stay? I always let them know that it is a matter of preference to them, and it doesn’t affect my job at all, as long as they are willing to agree to some conditions. Those conditions are that the homeowner needs to allow me or any potential buyer and their agent access to the property, so that we can find a buyer and receive an offer. Without a buyer or an offer there is no short sale. The next thing they need to understand is that the bank is going to put their terms of a short sale approval in the form of writing in what is typically called a short sale approval letter. This approval letter will state the date that the property needs to close which is the date that the homeowner needs to move out and they NEED to comply with this date.
To get an extension date on these approval letters can at times be difficult and tricky and can essentially at times, kill the whole deal. Not only that, in this market buyers want their property when they want their property and typically are not going to be too lenient when it comes to extending the closing date. We have recently had some homeowners state they don’t want to move out once they are granted a short sale by the bank, and basically want to stay longer. This is not tolerated by the banks or many buyers. By not moving out on the date of the short sale approval letter, you are essentially putting your whole short sale transaction in jeopardy, and making the bank and the buyers very angry. I would always recommend talking to a real estate attorney first, before deciding on your own that you want to stay in the property longer.
But if you are willing to move out when the bank demands and you are willing to allow the property to be shown to buyers then there is no harm what so ever if you decide to stay. You just have to weigh out the pros and cons of each scenario. Below is a list of them for you to consider.
PROS for staying IN the Home:
- Essentially live rent free for the time it takes to complete. (60-120 days)
- Save a nest egg of money, to pay other bills or for a large deposit on a rental
- Enjoy the use of your home before you need to leave
- Can help with HAFA eligibility
CONS for staying IN the home:
- Have to make arrangements to show the property, buyer coming through, just like a traditional sale.
- Need to keep the home in showing condition
- The bank will determine your move out date, and you need to abide
- No extensions on move out date.
PROS for LEAVING the home right away:
- Find a place to rent BEFORE credit becomes too damaged
- Can move on with your life quicker and easier
- Don’t have to worry about showings, open houses or intrusions
- Move on your own timeline and convenience
CONS for LEAVING the home right away:
- You MIGHT become ineligible for HAFA (the government short sale program)
- The property will be unsupervised and possibly not maintained.
- The bank may foreclose on a vacated property more quickly than an occupied one.
- It could possibly change the status of the property for you tax wise (primary residence vs. non primary residence, Talk to your accountant)