I started closing short sales 8 years ago, long before it became so commonplace. Over the past 24 months, I've seen more short sales on the market than ever before. Mostly due to the rapid decline in property values or some other financial destroying circumstance; homeowners have found themselves exercising this option. Regardless of the reason, banks have been working with homeowners to try and keep their homes. Banks are willingly offering modifications and refi's to help homeowners over the hump. However, there are certain circumstances where even the bank cannot bridge the gap using traditional methods. In these cases, a short sale is your best move.
A short sale occurs when the bank agrees to settle for less than the principle balance owed on a home. Say the market value for a home has declined to $250,000 and the mortgage owed is $285,000. In this case, the bank will take about a $50,000 loss on this property minus fees for selling. This seems like a huge loss for the bank, but actually it is less than what it would cost them if the property were to foreclose. When a property goes into foreclosure, it cost the bank an average of $35,000 and the higher the price the greater the loss. Contrary to popular belief, properties do not have to be delinquent to request a short sale. The only condition is the market value is less than the principle balance on the loan.
How does a short sale work? Began by calling a professional Realtor to help you in determining if a short sale is best for your situation. Then call your bank and request a short sale package. After you have completed the package and your Realtor has sent all required documents, then the bank will begin the review process. The review process can range from 60 - 180 days, depending on the bank and status of the property. Loans that are delinquent will have a higher priority than loans that are current.
What are the repercussions? It depends on the age of your mortgage, the amount of the short sale and the type of loan you have. This is not a one size fits all process. I've closed some short sales where the bank forgave the entire loss and others where the bank recollaterized the debt into an unsecure loan to be paid back over 30 years. Unfortunately, there is no way to determine before hand which scenario you will be presented with until after the review process.
If you find yourself in need of a short sale or need a quick sale to avoid foreclosure, make sure you secure a seasoned Realtor who is experienced in handling these types of transactions. We are available to assist you in these difficult situations.
Comments(11)