Your short sale questions – answered:
1) What a Short Sale is. 2) What a Short Sale isn’t. 3) Approved Short Sales 4) Unapproved Short Sales
If hardship can be demonstrated, and IF THE LENDER WILL AGREE TO TAKE LESS THAN WHAT’S OWED ON THE LOAN AS A RESULT OF THAT HARDSHIP, you may well have a short sale. Short sales have increased dramatically over the past few years as property values dropped. Most involve real estate that was purchased at the top of the market, by homeowners who put down minuscule down-payments and took out substantial loan amounts. As real estate values began to plummet and economic conditions tightened in 2007 and 2008 lots of homeowners found themselves underwater …
“Short Sale” is a household word to some. To others, it’s term often misunderstood. And it’s one of the most frequently asked questions I get, as a Realtor. In short, and simply put, the term short sale means that the lender gets less than what’s owed. But it’s a bit more complex, so here goes:
What’s NOT a SHORT SALE? – It is NOT a short sale simply because the house is selling for less than what’s owed on the mortgage. Sellers often bring cash to closing (enough to pay off their loan)… A seller who takes a loss on the sale of his/her home but is able to come to the closing table and pay off the loan, avoids having the stigma of bad credit.
“Approved Short Sale” : 1) Sales price established (and hypothetically agreed) to by the lender before the purchase offer/contract comes in.
“Unapproved Short Sale” : 1) Unapproved short sales are the most common type of short sale these days. 2) With unapproved short sales, the bank normally won’t commit to a price prior to receiving an offer. Once the lender has an actual offer in hand, they evaluate it, order a BPO (broker price opinion), and come up with a price they’ll likely accept. 3) Unapproved short sales, are priced “in the dark” so to speak. A Realtor establishes a list price that he/she feels is fair… based on comparable sales (hopefully… but not necessarily). Unfortunately, there is often little rhyme or reason for the price chosen. Sometimes the list price is quite high … often it’s well below what the property will appraise at. Inaccurate pricing can be frustrating for everyone involved … buyers, sellers, Realtors and lenders … and can be a recipe for disaster.
Can be sweet! Handled by an expert, a short sale can be very sweet and very lucrative. Who the Realtor and lender are can potentially shorten (or lengthen) the process … (or throw a stick in the spokes and derail the whole transaction!!!) . Some short sales close relatively quickly (I use that term loosely here) … Others can take upward of 8 months to close…. if at all!
Can be a waste of time! Short sales are not for everyone. There are no guarantees the bank will agree to the sale… and the plot thickens further when there are multiple lien holders involved. Example: if there’s a home equity line of credit along with the primary lien holder, you have two decision makers. The more decision makers, the tougher short sales can be to close.
Unapproved short sales, particularly when there are multiple lien holders(ie. a home equity line of credit) are unquestionably more problematic.
Approved short sales can be a piece of cake though, depending on the lender and on the Realtor listing the property and handling the transaction.
Do you have grounds for requesting a short sale? If the amount due on the mortgage is above what a house will sell for – and if the homeowner can demonstrate hardhip or distress – you may well have a SHORT SALE… The seller must be able to demonstrate harship ( whether it’s inability to pay the mortgage, necessity to move due to job transfer, layoffs, etc).
Are you wanting to purchase a short sale? Buying a short sale can be a fabulous deal … Just do your due diligence before jumping in. Some lenders have a better track record. Some Realtors have a better success record. It’s frustrating not to be successful… use an agent who is successful in closing them.
Please feel free to contact the Restivo Team anytime you’re ready to buy or sell real estate – anywhere in South Florida. We will be happy to chat with you about it, and we definitely look forward to making your next move a good one! Our team can be reached anytime on our cellulars 305 793-1365… or … 305 632-0164… or via email restivo.v@ewm.com
