What is a Short Sale?
A short sale occurs when a lender accepts less for the home than the amount owed on the mortgage. Typically, a short sale is executed to prevent a home from going into foreclosure. Often a bank will choose to allow a short sale if it believes that the short sale will result in a smaller financial loss than a foreclosure. For the home owner, opting for a short sale is more advantageous than letting the bank foreclose on the home; the credit report is less tarnished with a short sale (comparatively speaking) and credit repair typically is much easier. In summary, a short sale is nothing more than negotiating with lien holders, a payoff on a home that is less than what is owed to the lien holders.
How do I benefit from a short sale?
Most home owners considering a short sale are behind on their mortgage payments or are soon to be facing foreclosure. Comparatively, a short sale will have less of a negative impact on the home owner’s credit than a foreclosure; each home owner’s situation will be unique and as a result, so will the effect on the home owner’s credit report. We always encourage home owners to consult with a CPA or an attorney to fully understand the pros and cons of engaging a short sale exit strategy for their home.
I know I want to do a short sale; where do I begin?
You can Click Here and submit our brief contact form; note in the message field that you are interested in a short sale for your home and one of our short sale specialists will contact you promptly. In this phone consultation we will discuss all of your possible options, including loan modification, deed in lieu of foreclosure, or foreclosure, and help you decide if a short sale is your best option. We will also attempt to determine if we feel you would qualify for HAFA, the government sponsored short sale program where home owners can qualify for $3,000 relocation money if approved.
Are short sales guaranteed to work?
No, short sales are not guaranteed to work. Even though the number of short sales are increasing, banks have to approve the sale price on the purchase contract for the home. Each bank has its own guidelines in determining if and how the short sale will be approved. There is not necessarily a way for us to tell you if you are going to qualify; often we simply have to submit the short sale package and await notification from the bank as to whether or not the short sale will be approved. Typically we say that owners need to have a pretty significant hardship to qualify, but we have assisted many investors in short selling their over-leveraged investment properties. Many of these investors had assets and income, but the argument of the massive negative cash flow and significant loss in value was enough.
How long is the short sale process?
A short sale can take 30 – 90 days and often longer. The earlier in the process we can contact the banks with your file, the better the chance that we can get the short sale completed in a more timely manner. If you are a week away from a foreclosure auction, there is a slim chance that we can get that auction postponed, but the best option is to contact us well in advance of any auctions. The time line for short sales is also dictated by whether or not the initial buyer remains in the transaction. If a buyer cancels and we have to market for another buyer, the time line will be extended.
How much does it cost to execute a short sale?
As a home owner or seller who is in need of a short sale, a short sale should not cost you anything out of pocket. As your real estate agent we are paid commissions if we sell the property, just like any other property sale. The difference between a traditional sale and a short sale is that the short sale lender will the pay the real estate commissions rather than the seller. The short sale lender expects this, as they would have to pay a real estate agent to sell the property if they foreclosed, and have to sell the home as a bank owned property. For that matter, all fees associated with the transaction are paid by the lender. If funds are short to close and the seller “chooses” to pay a little to close, they usually can, but it is a choice of the seller.
If you have additional questions that are not answered here, please Click Here to contact us with your question or give us a call at (480) 788-6473. We want to answer any questions you may have.