Short Sales

What is a Short Sale

A short sale is an option when a homeowner owes more on his/her property combined with closing costs and commission than the current market value.

A short sale can occur if and when a negotiation is entered into with the homeowner’s mortgage company or companies.

This process is when the lender accepts less money than what is owed on the mortgage balance.  For example if you owe $350,000 on your home and now the property is worth $150,000, the home would be listed for the current market value. The loss of equity in this case would be $200,000; the mortgage company would allow the homeowner to sell the property at market value and take a loss on the balance of the loan. A short sale is a way to avoid foreclosure. For other options on avoiding foreclosure check out our “options on avoiding foreclosure” tab found on the right side.

A majority of agents do not know what to do with an owner that is short on their mortgage. As Certified Distressed Property Experts we have studied the process and are fully equipped to handle the short sale process.

What to Expect When Purchasing a Short Sale Property

A house that is a short sale is a home that is being sold by a distressed property owner. This means a homeowner owes more on his/her property combined with closing costs and commission than the current market value. A short sale can occur if and when a negotiation is entered into with the homeowner’s mortgage company or companies. This process is when the lender accepts less money than what is owed on the mortgage balance.  This means they no longer can afford the house and are trying to sell it before it goes into foreclosure. This will impact their credit score less and have them purchase a home much sooner than they could if they let it go to foreclosure. This kind of a transaction works for both the buyer and seller. The seller is able to relieve themselves of their mortgage obligation and the buyer is able to purchase a home at a great deal.

A buyer who is trying to purchase a home within a month or two might not want to look at short sales. Short sales are homes that not only need to get an accepted offer from the seller but also need to be accepted by the homeowner’s mortgage lender(s). This usually takes more than two months. We have seen some close sooner, but usually it’s a longer process.

I likes to send an offer to an agent who is going to accept only one offer on a short sale. The reason I recommend that buyers only offer on short sales that the listing agent will accept only one offer on, is that it may take months for the bank to approve one of the offers and it may not be my buyers offer. That may keep a buyer waiting for a property that they will not get and miss an opportunity of another property that they would have otherwise placed an offer on. I want my clients to find the right house that is a short sale with the highest probability of an approval from the bank that will close escrow.

Sometimes even though the homeowner has accepted an offer, the mortgage lender may not. Sometimes the mortgage lender may give a counter offer. This means that the initial terms, purchase price, or conditions might be countered. There are some cases that the buyer may need to come up with additional funds to close a contract.

Cash buyers of a short sale need proof of funds to send to the mortgage lender. Account numbers and SSN can/will be blacked out when sent. Lenders want proof of funds or they will not look at the offer.

A buyer needs to understand that they can ask for seller concessions.  Often concessions up to 3% will be accepted but anything more may not be accepted. Buyers should understand that it is important to consider purchasing items such as a home warranty, but it is not advisable to ask the seller to pay for it because a majority of lenders will not pay for it and it may prolong the short sale approval process.

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