What is Short Sale?
A short sale is where a homeowner works out an agreement with their lender to sell their home for less than what they owe. Through a short sale the lender pays all the closing costs including real estate commissions, and as part of this agreement the lender typically forgives the rest of the loan. Through a short sale a homeowner is able to avoid foreclosure, protect their credit and walk away from their mortgage without any debt and/or tax consequences.
Lets recap the benefits of a short sale:
- Pay Absolutely No Commissions or Closing Costs,
- Avoid Foreclosure,
- Save Your Credit,
- Walk Away From Your Home With No Debt and/or Tax Consequences.
Short Sale Process
If you qualify for a Short Sale, the process will be similar to a traditional real estate sales transaction. One of our network of short sale specialists will work with you to sell your home quickly and negotiate with your lender to approve the short sale.
Here are some important steps that our network of short sale specialists take to execute a smooth transaction:
- Determine market value sale price,
- Negotiate with 2nd mortgage holder (if necessary) and collect all applicable financial information,
- Review Buyer Offers,
- Negotiate Terms of Sale.
A government program called HAFA allows certain homeowners to receive assistance with relocation and moving expenses to help aid in the transition to a new residence.
Short Sales can take up to 120 days to complete because the time frame can vary depending on your specific circumstances. If your home is not selling you may qualify to transfer your ownership to the mortgage holder which is known as a Deed-In-Lieu of Foreclosure.
Why Do Banks Short Sale?
A Lender or bank takes a discount or agrees a short sale because it saves them money. It gets bad debt off their books so they can reinvest that money by giving out another loan to a customer. On average a Lender loses between $30,000 to $80,000 on each property that they take back as a bank owned property. In many cases a short sale is necessary in order to get you out from under your mortgage debt. By doing a short sale, you will be able to take a large bite out of the money you owe to your mortgage company, so that you are no longer liable for the entire amount.
Also, here are the most common reasons banks will agree to a short sale:
- The mortgage is in arrears or foreclosure,
- The property is in poor condition,
- The homeowner has hardships and cannot afford the payments,
- New homes in the area are being chosen over existing homes,
- The area or neighborhood has depreciated in value,
- The bank's shareholders are concerned when there are too many defaulting loans on the books,
- Some banks are required to prove a loss each month. Let's help them out!
- Some banks are required to have an amount equal to or up to six times the retail value of each REO "on hand" - Ouch, that hurts!
- An REO is a liability, not asset. Too many liabilities will cause any business to go under if not dealt with quickly.
As you can see, the homeowner actually has the advantage when it comes to a short sale. The banks would rather deal with the hassle of the long short sale process than taking a foreclose hit.
