West Michigan Short Sales - FAQ's to buying and selling in the West Michigan Real Estate Market

The West Michigan real estate market is loaded with listings that are termed, "short sales".  You hear it all the time.  "They are selling their house on a short sale".  So what exactly does it mean?  Is selling it short as opposed to selling it long . . .well no not really.  What does a seller need to know about selling a short sale in the Greater Grand Rapids Real Estate Market?  Are there things a buyer should know about purchasing a short sale in West Michigan?  This is part I on a series of information both buyers and sellers should know when considering purchasing a home that is a short-sale and selling a home as West Michigan Short Sale.

Most would agree there is no good way to lose a home.  If there were one best way to lose a home, a short sale would probably be the least damaging to the credit score.  It has been said that when you sell a house at short-sale, you could potentially get on your feet and purchase a new home in 12-18 months.  If your home forecloses, you have 7 years of bad credit.  It has also been explained like a car accident.  In some accidents the car is fixable, you may have to wait a while to get it back from the body shop, but it is fixable.  In some car accidents the car is totaled, there is nothing you can do to fix the car.  A short sale is much like a fixable accident. 

So what exactly is a short sale?  A short sale is when a home owner is asking the bank to take less than the actual amount owed on the home loan, so that the home may be sold instead of foreclosed.  For example, Mr. Smith bought his home in 2006 for $200,000 and financed it 100%.  He still owes $198,000 on the home.  He has lost his job and has been struggling to make the payments and finds he can no longer make the payments.  He has had the home listed at $200,000 for a month but there has not been one call.  His Realtor tells him the home is only worth $140,000 in this market.  If he drops the price down to $140,000 and he gets an offer for $140,000, his realtor will be negotiating a short sale with the bank.

There is another home for sale in West Michigan that I want--can I just sell my home short so that I can purchase that one?  It is not that simple.  You can not just request a short-sale because you want to purchase another home.  Short-sales are for people who are no longer able to make the payments on their home and who do not have the funds to make up the difference.  It is not for the person who just wants a different home.  There are certain criteria that must be met.  In addition, for a short sale to even be considered, you generally already have to be behind on your mortgage payments.  In that case, your credit would already be damaged and the likelyhood of finding a lender to loan you the money for the new house is slim to none.

Will the home owner be responsible for bringing the deficeit amount to close?  If the owner does not have the money, the answer is usually no.  One of the biggest jobs of a Realtor in the West Michigan Real Estate market is to negotiate with the bank for the short-sale.  The bank is usually more apt to accept a short-sale because the cost of selling the house short is much less than the home foreclosing.  A good realtor with a negotiating team can usually get the bank to accept only the amount offered on the home. Many times this leaves the seller in a position to purchase a smaller home in which they can afford the payment in just a few short months.l

Why would I want to negotiate with the bank to owe anything . . .if it forecloses I don't have to pay anything?  The number one reason you do not want a house to foreclose is that it will destroy your credit for up to 7 years or more.  In addition, the bank has every right to come after you for the entire amount.  In the case of a short sale, the bank has negotiated that, in exchange for a small sum of money, they will consider the debt cleared.  It will all depend on the terms of your negotiations.

Are all banks the same and do they all have the same rules?  Absolutely not!  Each institution has its own set of rules and criteria for accepting a short sale.  What works for one bank may not work for another bank.  It is important to understand that not all  short-sales will be approved.  It is a long and tedious process that sometimes ends in disappointment.  It may take anywhere from 6 weeks to 6 months to get an approval on a West Michigan Short sale.

What is the process for working toward selling my West Michigan home in a short sale?  Check out the next installment in this series as we examine how to sell your West Michigan home as a short sale.

Photo Attributes: Picture 1; Picture 2