1. What is a Short Sale? It is the sale of a home where the lender(s) holding the mortgage agrees to accept less than is owed on the mortgage as a payment in full from a new buyer not related to the seller in any way.
2. Usually Short Sale properties are handled through real estate agents EXPERIENCED in the Short Sale process. Agents list these properties through their listing service(usually required by the lender) and then present offers received to the lender. Lenders will only accept a short sale if they determine it is in their best interest to do so.
3. The lender must agree to the Short Sale payoff, because there is usually a significant loss to the lender. This is a big issue and just getting the lender(s) to make a decision is time consuming. Again, experienced short sale real estate agents know the procedures and are qualified in handling the volumes of paperwork and communication involved. There is plenty of both.
4. The seller in the Short Sale just gets nothing(zero) from the sale, but he usually pays no closing costs, sales commissions, etc. He must agree to this ahead of time and at the same time prove to the lender he cannot afford to make his future home payments. He also has to prove he has no assets and no income to work with.
5. The bank also has to decide whether it will release the homeowner(seller) from the liability of the loss the lender incurs in the transaction This loss can be considered unearned income and subject to taxiation by the IRS. This needs to be negotiated during the purchase offer.
6. Second/third mortgages on the property also have to be negotiated with their lender(s). If they do not release their mortgages there can be no deal. On the other hand, if the property goes into foreclosure, their mortgages(liens) will be 100% lost. Tax liens, mechanic’s liens all have to be negotiated and this takes more time.
7. Many Short Sales Fail. Why? It can easily take up to 12 months for all parties involved to approve the transaction and many buyers are not willing or cannot wait that long to close a transaction. At the same time, a lender’s separate foreclosure department may be trying to foreclose the property while the short sale department is negotiating on the short sale. This leads to much confusion and creates many issues that have to be overcome. Be it known, the average time to close a Short Sale is much less than 12 months, but a few times the process can be as long as 12 months.
8. After all is said and the transaction closes, the savings on a short sale can be very large. The buyer just needs patience, a good Short Sale REALTOR and a good attorney. That is the way to a great Short Sale deal!
Need a Short Sale? Call Earl @ 770-377-5793 or email: EARL@EARLPARK.NET