Watch any popular real estate show on television, and you’ve probably heard a lot of different takes on short sales. Some people swear by them, while others avoid them.
But what is a short sale all about?
A short sale is the sale of a property for less than the mortgage amount. Short sales aren’t quite the same as foreclosures: They’re a negotiated agreement between a lender and borrower. Both parties are motivated to sell, but that doesn’t mean it’s always the best deal.
For a short sale to happen, two things need to be true:
- The homeowner is so far behind on payments that catching up isn’t an option.
- The house must be worth less than the amount remaining on the mortgage.
They are a “last chance” option for avoiding foreclosure, but the process can seem slow for the buyer.
Buyers Beware This Big Myth Around Short Sales
The biggest myth around short sales is that the seller will push to get the sale done quickly.
Although the seller might be ready to move on, the lender must approve everything in the short sale process. And lenders – mostly big banks – have plenty of time to ensure they recover as much of the home’s value as possible.
This means the process can go on for months.
How Does a Short Sale Work?
When buying a house, you might want to explore other options before short sales, especially as a first-time buyer. If you decide to go forward, it’s important to understand exactly how the process plays out.
- The Homeowner Engages the Lender
Before a short sale can even begin, the current homeowner needs to work with the lender and do some persuasion behind the scenes. They have to prove not only that they can no longer make their payments (or catch up) but that selling the home is viable under current market conditions. - A Real Estate Agent Lists the Property
If the lender gives the nod, the seller goes ahead with listing through a trusted real estate agent. Those interested in buying a house will find the property in all the usual ways: Online listings, virtual tours, and the rest. The goal remains to close on the property within 60 days. - The Lender Reviews The Buyers’ Offers
The lender has final approval on all buyer offers. A sales contract must be written up for each offer for the lender’s review. In some cases, the lender may not respond to an offer at all. Most of the time, the offer is returned with various proposed changes to make it acceptable. - The Buyer Appeases or Rejects Terms
If they’re still interested in buying a house under the amended terms, the would-be buyer can agree to move forward. They can also continue negotiations by rejecting certain terms or proposing alternatives. Any terms don’t bound buyers until they decide to sign the contract. - The Short Sale Property Closes
If the property closes, the title is transferred to the buyer. The lender receives all proceeds from the sale, and the seller is released from the mortgage loan. The short sale is concluded, and the buyer can go on to the rest of their time as a new homeowner.
Choosing an expert real estate agent is always crucial when buying a house, but it’s especially critical for short sales. Lenders do everything they can to protect their interests––be sure you are doing the same!
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CBR, SRES - Licensed Real Estate Salesperson
Phone: 516.849.5895 | [email protected]
As an experienced professional Neil will do the leg work, keeping you up-to-date with new listings and the various market conditions that may impact the home purchase process. Sellers can also benefit from his skills in finance, negotiation, contractual agreements, and RE marketing. Call today and allow Neil to guide you through the complexities of buying or selling your home, eliminating hassles, and stress.
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