What is a short sale? A real estate short sale is when a home owner sells their property for less than what they owe on the mortgage, and the lender gives their permission to do this. Short sales are becoming more popular in areas or circumstances where the seller owes more than the home will likely sell for and the seller does not have the financial means to make up the difference. The seller should retain the services of a REALTOR with knowledge and experience in short sale transactions. The REALTOR gets written permission from the seller to negotiate on the sellers behalf directly with the mortgage company. The lender often allows the REALTOR fees and closing costs to be deducted if the seller does not have the financial means to do so. Offers to purchase are then presented to the mortgage holder and typically to any PMI company insuring the loan.
If you are selling your home as part of a short sale transaction, make sure to negotiate for a release and full satisfaction of the mortgage from your lender. Depending on the laws of your state and your individual circumstances, lenders may be able to wait a year or two for you to improve your financial situation, and then file a deficiency judgment against you to try and recover the money that you still owe them. The only way for you to avoid this risk is to have the lender not only release the mortgage lien, but also agree in writing to a full satisfaction of the mortgage. You should be aware that short sales are best left as a last resort when there is no other viable option to sell your home and foreclosure may be in the future. You must be able to prove that you lack the financial resources to sell your home by more traditional means.
Also read the Mortgage Forgiveness Debt Relief Act of 2007, and be aware the I.R.S. could consider debt forgiveness as income. The advice of an attorney and a CPA is highly recommended.
Short sales negatively impact your credit and your ability to purchase another home. While preferable to a foreclosure, it is still not an option for a homeowner to seek lightly. A professional REALTOR can counsel you on your options and help you choose the right course of action for your situation.
If you would like the counsel of a REALTOR regarding the steps to take to sell your property on a short sale, please call Jolynna McCune with GROOME & CO REALTORS at 901-649-0221. All consultations are confidential.
If you are attempting to buy a home on a short sale, try to make sure the deal is closeable. Have your REALTOR verify the status of the sellers relationship and history of discussions with their lender regarding the likelihood of allowing a short sale. Many short sale listings are not closeable deals because the lender won't allow it, yet many weeks or months can be wasted in waiting it out.
How does a foreclosure differ from a short sale?
In a foreclosure the sellers have lost ownership of the property through a legal process and is being sold by the bank, mortgage holder or in some instances the PMI company or guarantor of the loan. In a short sale the homeowner may still reside in the home and is still the legal owner of record. To purchase a foreclosure from a lender, a buyer must have strong financing from a reputable lender who funds loan directly (NOT mortgage brokers in most cases) or proof of cash funds prior to submission of an offer. Also, in most cases, the homes need at least some repair and the seller will generally not be willing to pay for those repairs. Therefore, the buyer must have available funds to repair the home after closing. In some cases, the lender for the buyer may require repairs to be done prior to closing to obtain the loan. This is typically true for FHA financing or other financing where buyer's down payment is minimal. In such instances a buyer is better to look for homes with very minimal damage or needed repair. If the terms of the offer allow, the buyer may have the home inspected within a short time frame after the offer is accepted to determine if the buyer would like to proceed with the sale.
Please give me a call or reply to this post to receive a weekly list of foreclosures in the area.
Other types of foreclosures are HUD homes or VA owned properties. These are homes that the department of housing and urban development or veterans affairs own. On HUD homes the process is more like an auction, where the seller allows the home to be shown by any REALTOR to prospective buyers. After the property has been available for a short period of time, the bid period ends and HUD reviews the offers. They will often accept one of the offers at that time. If HUD deems the offers too low, it will remain on the market and will be open to daily bids until a satisfactory offer arrives. A listing of HUD homes can be found on www.hud.gov and follow the links to Tennessee properties. GROOME & CO is registered with HUD and we will be happy to show you properties of interest.
There are many bargains in today's market for a buyer. Short sales, bank foreclosures, government foreclosures and relocation/corporate owned homes. However, do not overlook extremely motivated sellers with homes in excellent condition. In many instances a great home priced very well with excellent care and maintenance or numerous upgrades can be a better deal than that low priced foreclosure that needs tens of thousands in work ( which will typically have to be done with your cash rather than financed in the loan ). Have the guidance of a REALTOR to help you find the right deal for your circumstances. If time is not a concern then a short sale offer may be right for you. However, if you need a specific closing date or do not have large cash reserves for repairs and updates needed in a distressed property then a well priced traditional sale with a highly motivated seller may be the best route.
If you are interested in buying a short sale or need the counsel of a REALTOR regarding the steps to take to sell your property on a short sale, please give me a call! 901-649-0221