Solon Short Sales
Over the past few years, we have had numerous calls from buyers looking to buy a home in Solon and wanting a deal. They often mention their interest in bank owned and short sale homes. This post is for those who are looking to buy a home in Solon and are especially interested in Solon short sales but would like to learn a little more about what the process entails and where to find these particular homes. We have used the popular question and answer format in this post.
IS THERE A DIFFERENCE BETWEEN SHORT SALES AND BANK OWNED HOMES?
Bank owned homes and properties going through the short sale process are very different. If you are interested in a bank owned home, we can certainly assist you in finding them and walking you through the process as we have had a lot of experience in Solon banked owned homes. In fact, we covered this topic in great detail earlier in the year and highly recommend you reading "Cleveland Real Estate: Buying A Bank Owned Home, The Good, The Bad, and The Reality. This article will give you a very good foundation on the topic of buying a bank owned home.
In this particular post, we will focus on the short sale process and particular Solon short sales.
WHAT IS A SHORT SALE?
One of the popular definitions of a short sale is "the sale of real estate where the proceeds from the sale are not enough to cover the entire mortgage balance owed, thus causing a shortage." For example, let's say a homeowner owes $450,000 on a loan, yet the home could only sell for $400,000 on the open market. A seller in this situation is going to be "short" on funds and has a few options:
1. Sell the home and bring money to the closing table that will satisfy the shortage. In this case, approximately $50,000.
2. Let the property go into foreclosure
3. Negotiate a short sale with the mortgage holder ( s ), getting them to accept less then is owed
Since most people don't have the funds to bring to the table, sellers typically concentrate on the other two options. While walking away from a home and allowing the bank to simply foreclose may seem like an easy way out of a tough situation, many sellers consider #3 as the best option.
WHY WOULD A SELLER WANT TO SELL THEIR HOME THROUGH A SHORT-SALE?
Settling with the bank prior to foreclosure can help a seller avoid having a foreclosure on their credit. In addition, if the bank has to foreclose and take a loss, this monetary loss could be pursued by the bank in terms of a deficiency judgment. In other words, if the bank takes a $50,000 loss, as in the above example, they could come after the seller for that money at some point in the future. The thought of this judgment hanging over their heads is enough to motivate many sellers to try to negotiate with the bank up front and avoid the foreclosure process.
WHY WOULD A BANK WANT TO SETTLE INSTEAD OF FORECLOSING?
A bank will settle up front rather than foreclose if they think it makes sense financially. While there is often emotion involved on the sellers end, the bank or lender just looks at the dollars and sense. They simply must answer one basic question: Will they be better off settling for less than is owed and cutting their losses, or would going through the foreclosure process net them more money?
In the past few years, most banks were content to foreclose as they assumed they would sell the home and recoup their money. Today, financial institutions are a little more realistic. Given the current financial climate, more and more lenders are open to settling with the sellers and allowing them to sell their home as a short sale.
The foreclosure process is very expensive for a bank, and avoiding this often makes more sense. Also, during the short sale process, the owner often still lives in the property. This means basic maintenance is being done on the home, which in this case, is the bank's asset. If the home goes through foreclosure, the home could sit vacant for months or even years, leaving the bank with a devalued asset, often in need of costly repairs.
When all is said and done, taking a loss up front may be better than taking a bigger loss after foreclosure.
HOW LONG DOES THE SHORT-SALE PROCESS TAKE?
There is really no defined time frame for a short-sale as it depends on a variety of factors. Some can close in 60 days while others can take 6 months or longer. Some banks and lenders are easier to work with than others, so finding out who holds the mortgage (s ) is important. It is also critical that the seller has the proper team assembled to navigate them through the extensive and often frustrating process of negotiating a short sale with the bank. If the agent listing the short sale property is experienced in doing short sales or if they have a professional negotiator working on their behalf, the process can move along quickly. If the listing agent does not have experience with the process, things could take a very long time.
A short sale that has already been negotiated can close relatively quickly and is ideal for those in a hurry to close. Your agent can assist you with finding the short sale status of homes.
WHERE CAN A BUYER FIND SHORT SALE HOMES?
Working with an agent who can send you listings through their Multiple Listing Service ( MLS ) is the best way to get accurate information regarding short sales. In order for a bank to consider agreeing to a short sale, they must see that the home is actively being marketed by a real estate agent. In fact, the listing agreement is one of several documents that banks require to see prior to agreeing to a short sale. Therefore, all short sales are listed by real estate agents, and the MLS is the most accurate database of homes here in the Cleveland real estate market.
CAN'T I JUST BUY A LIST OF BANK OWNED AND SHORT SALE HOMES?
Some consumers will buy lists of bank owned and short sale properties, but these are not always accurate. List companies don't have access to any special information. They are merely reselling public information to consumers for a fee. Some of these companies also give outdated information. The real estate database of homes found in the MLS is the most accurate and current database available.
CAN ANY AGENT HELP ME WITH BUYING A SHORT SALE?
Yes, any licensed agent in the state of Ohio can assist you with buying a short sale property. However, you may want to make sure the agent you choose has experience with short sales as these transactions can be complicated.
Also, keep in mind that the listing agent, the agent that is selling the home and representing the seller, does not represent you. Therefore, it may make sense to have your own buyer's agent so you can have someone represent your interests. Since the seller pays the real estate commission, you don't have to pay a buyer's agent to get your own representation.
CAN'T I JUST WORK DIRECTLY WITH THE LISTING AGENT?
A buyer certainly has that right to do that here in Ohio, but it is important to understand that a listing agent cannot represent only you as they represent the seller. A qualified agent can sit down with you to dicuss Ohio agency laws and how it pertains to you as a buyer. Remember, buying a home, whether it is a short sale, bank owned, or traditional transaction, is major financial commitment. Therefore, you should become familiar with your rights as a consumer regarding a home purchase.
While short sales may present a great opportunity to get a good price on a home, there are other ways to get a deal as well. Sitting down with an experienced real estate agent will help you determine all the options available to you.
About The Authors:
Dan and Amy Schuman are Solon residents. They specialize in luxury homes, working with buyers relocating to Solon, and buyers looking to buy distressed properties in Solon.
If you are looking to buy or sell a home in Solon or the surrounding Eastern suburbs, please contact the Schuman Team.
For a personal consultation or to speak directly to The Schuman Team, call 216-346-3235.
VIEW ALL SOLON HOMES FOR SALE BY CLICKING BELOW
* Please note that the Schuman Team, Amy and Dan Schuman, are licensed real estate agents in the State of Ohio but are NOT licensed to practice law. We want to be clear that while a real estate agent can assist with a buyer and seller during the real estate transaction, the process, especially buying a short sale or bank owned home can be more complicated than a traditional transaction. Therefore, we welcome consumers to seek the advice of a qualified real estate attorney prior to signing any legal documents.
Solon Short Sales is the property of The Schuman Team and may not be duplicated or used without their written consent. ©Oct,2009