Short Sale and Foreclosure experts you can trust.
Short Sale and Foreclosure experts you can trust.
A short sale is when you owe more money on the home than it is worth. You want to sell your home but nobody will pay $300,000 for a $100,000 house. In this situation the bank is willing to accept a lose, as long as your willing to sell the home. Sound too good to be true? It’s not. The banks approve short sales all of the time. This is an awesome alternative to foreclosure.
Here is a simple example:
A person is selling their home for $100,000 when there is still $300,000 remaining on the mortgage. In this example, the difference of $200,000 is what the lender must approve for a discount. Once approved by the lender, you may proceed to closing the transaction. Closing on the transaction stops the foreclosure completely.
You will hear different answers to this question. Most lenders have the same process for short sale.
Here is what is required to complete a short sale:
Here is what is not required to complete a short sale:
What is a short sale in real estate? The term “short sale” refers to the fact that the property is being sold for less than the balance remaining on the mortgage. Unfortunately, the process to go through a short sale is not “short”
While there are more than a few requirements to qualify for a short sale, the steps and negotiations that go on “behind the scene” with your lender(s) are quite extensive. They are very paperwork-intensive transactions and they are not an easy process. It is something that requires a professional or team of real estate agents with an extensive background in short sales and connections within the banks.
Overall, there are a lot of misunderstandings around short sales. One common misconception is that lenders just want to be rid of the property and will move quickly to get as much money back as possible. There are some cases that a short sale may be a “good deal”, but in reality, the lender will take their time to recover as much of their loss as they can. Just because a property is listed as a short sale does not mean the lender has to accept your offer, even if the seller accepts it. This is why you need an expert on your side.
We have put together a detailed explanation of the Short Sale Process that you can read through HERE.
It all comes down to the numbers. Banks and the investors that own your mortgage are in the business of making money. In most cases, accepting a short sale is going to cost them less money than it would if they let your property go into foreclosure. Typically, the foreclosure process takes longer, the property sits vacant, there is more risk for vandalism or damage, and overall, the legal fees involved in the foreclosure process can be costly. By accepting a short sale, the lender is able to avoid the lengthy and costly foreclosure process.
For homeowners, short sales are generally preferable to foreclosures for multiple reasons. A short sale can be used as a tool to delay the foreclosure process if you are already behind on mortgage payments and/or your home is already in foreclosure. A short sale will give you some control over the process and time to find another home, while a foreclosure happens on the bank’s terms and ends with property seizure and eviction.
There is not any cost to complete a short sale, there is generally less impact on your credit (a foreclosure will linger on your credit report for seven years), and there may be tax advantages to completing a short sale vs foreclosure. If successfully executed, a short sale can mitigate the financial fallout of an unfortunate situation.
In order for a short sale to take place, both the lender and the homeowner have to be willing to sell the house to the new buyer at a loss. The homeowner will make no profit (and also will pay no fees), and the lender will lose money selling the house for less than the amount owed.
Absolutely – While a short sale is never an ideal situation to be in, in almost every circumstance a short sales are going to be better than letting a property go into foreclosure. We have put together a detailed guide explaining the differences between short sale vs foreclosure. Some of the bullet points are:
In many ways, short sales are similar to a traditional sale. Your home will be listed for sale and we will market the home for a potential buyer. Everything happens the same until we receive an offer from a potential buyer on your home. At that point, the real estate transaction pauses, and then we begin the negotiations with your lender. Once we receive the approval from your lender, the transaction is “un-paused”, we start the 30-day escrow period and close escrow the same as a traditional sale.
A short sale is different from selling your home at a loss because you will not pay any fees or commissions (everything is paid by the lender). If you chose to sell your home for less than you owe in a normal home sale, you would be required to pay all of the fees and the amount that you would be short to pay off the mortgage.
When you complete a short sale, you will need the lender to approve the transaction. The lender will not be concerned that the sale is less than the amount owed, but will want to make sure the sale is at market value. You will still work with a real estate agent (or team of real estate agents), but it is crucial you hire someone with short sale experience.
The short sale process is very similar to a normal real estate sales transaction. You will work with a real estate agent to market and find a buyer for your home. However, your lender will also be working with you and your real estate agent throughout the process. We have a detailed outline of the short sale process that you can read HERE. In short, the lender will:
In many cases, we are able to negotiate for you to receive relocation assistance from the lender when your home sells, in order to use toward your moving expenses and to make the transition to another home easier.
You may have heard horror stories of a buyer and seller waiting six months or more, only to find out the offer on the property was declined. While this can happen, it is not typical and most likely the sign of an inexperienced agent handling the short sale negotiations. Lenders can accept short a sale within a month or two, but typically, short sale acceptance may take 60 to 120 days. The time frame could be slightly shorter or longer depending upon your specific situation, your property, and your lender(s).
Is it possible for a buyer to get a good deal on a short sale? Absolutely – A short sale may be a great opportunity for you to find a property that is a little bit below market value. Oftentimes properties that are being sold as a short sale have some deferred maintenance and because of that, are being sold below market value. Make sure that your agent provides you with a list of recent active, pending, and most importantly recently sold homes in the area with similar characteristics for comparison. Don’t fall into the misconception that just because it is a short sale that it is automatically going to be discounted.
If you are considering buying a property that is listed as a short sale, don’t expect any repairs to be done. Lenders will not pay for any repairs and often will not even pay some of the typical buyer fees that a seller would cover. Lenders expect the buyer to purchase the home in its current condition.
This can include important repairs and items like:
If you are a buyer and considering a short sale, or wondering “what is a short sale home”, make sure to read through our short sale buying guide to get a good understanding of everything involved with buying a property that is listed as a short sale.
If you have read through this and you are considering your options, the first step is to consult professionals. We are always happy to answer all of your questions and there is never any obligation to have a conversation with us. Our team does not charge any fees and we offer discrete consultations over the phone, at your office, or in your home. We also have excellent recommendations to an attorney, tax professionals, and/or any other referral you may need. Short sales are a complex transaction and you may find yourself in even bigger financial trouble if everything isn’t handled properly, which is why it is imperative you have a great team on your side. You also want to make sure that the person or team that is handling the sale of your home is licensed by the California Association of Realtors. (A license is required under section 10131(a) of the Business & Processions Code.
If you are wondering how much your home is worth and trying to determine if you have enough equity in your property, feel free to contact us today and we can put together a detailed market analysis to determine the market value of your home. We will also put together a “net sheet”, which breaks down all of the fees involved with selling to determine how much equity you have, or, how much you are currently underwater on your home.
