What is a Short Sale?

SP_EWP_029-300LA short sale is when the lien holder bank takes less than the debit owed on the property. Often times better than a foreclosure (but not always). When a homeowner can no longer pay their mortgage for reasons such as job loss, divorce, health status or death of an adult family member, or even a job transfer with the housing market not baring a sale price to cover what is owed on the property. These are the same reasons you run into foreclosures.

The seller usually has to call the bank and request to go through this process. This can be before the home is listed or while it is listed. The home owner often times has to prove hardship and explain reasons for needing to do this.

A short sale will effect your credit, but from what I have been told from mortgage lenders that I work with is that a foreclosure hits your credit worse and for a longer time than a short sale. Many sellers want to get the challenging situation behind them. Often times you can recover quicker in a few years and go on to re-purchase a new home if you get things cleared up and work on your credit.

In the transactions that I have processed, the some of the banks often want to get 85% of the appraised value at minimum for the home. There is also a lot of paper work for the sellers and the buyers need to be patient. I have had short sales take 6 weeks and even up to 5-6 months. The processing time can depend on the co-operation of the buyers and sellers and even the bank processes. The larger the bank the more red tape.

If a seller is going into bankruptcy, it is advised to speak to your lawyer. Often times, a short sale is not worth the effort if the property is going to be included in a bankruptcy.

If you are considering a short sale, you need an agent that has the patience to work through the process with you. One of the nice things about the short sale process is that some banks have actually paid my seller’s to close as a short sale rather than let the home go into foreclosure. It was not the case with all situations and all amounts were different. So the bank is rewarding the seller to avoid foreclosure.

Leave a Reply