Not so long ago, few consumers had ever heard of a short sale.  However, now the term is spreading like wildfire and leaving a lot of frustration along its path.  Today, when you mention the term "short sale", real estate agents and homeowners alike tend to roll their eyes.

The term short sale can be defined as selling a property for less than the amount owed on the mortgage.  This strategy has recently exploded in popularity as an exit for those homeowners who are financially strapped.  A short sale doesn't hurt one's credit report as much as a foreclosure would.  However, the transaction must be approved by the lender or lenders holding the lien on the property. 

There are some real estate agents that try to keep clear of short sales completely and even go as far as to specifically list their properties as "not a short sale."

Last May, plans were announced by the Treasury Secretary to streamline the process and offer financial incentives to investors and mortgage services that would accept short sales.  Here it is, four months later, and there are still no specific details of how this plan is going to work.  But, a spokeswoman for the Treasury Department says an update for the program will be ready and released within a few more weeks.

During 2009's second quarter, almost 14% of all home sales were short sales.  These short sales were actually made by first-time buyers who usually had more time to wait on the process.  I also must mention, two out of three short sales never close.  Therefore, it is a good idea to have at least three offers or more on every completed short sale.  Home buyers are also now giving a lot of verbal offers in hopes that a lender will say yes to one of them.  This is only holding up the approval process at mortgage services though. 

The short sale cycle has almost become an unproductive and ugly cycle.   Approving a short sale involves a rather large packet of documents that includes tax returns, bank statements, a hardship letter telling why a short sale is needed and sources of income.  Once the paperwork is submitted to the mortgage provider, it then has to be entered into the system and assigned to a real person.  Then, an appraisal has to done on the property.  It's a lengthy process.

With a wealth of inventory on the real estate market and drastically reduced prices, there are many options for sellers and buyers to choose from.  Therefore, be smart and do your research to see which option would best suite your needs.

Realtor® Cheryl Westwood  ~  Lake Havasu City Real Estate

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