Most home buyers and sellers don’t understand what a short sale is. The easiest definition is when a bank is willing to accept a price that is less than the mortgage owed on the property. This results in the seller being “short” the full amount of the debt. The reason a bank is willing to consider a short sale is that it is less expensive than going through the foreclosure process and can result in the bank receiving a high percentage of the mortgage amount than if it goes on the market as a foreclosure.
One of the challenges in doing a short sale is that ALL lien holders must agree to the sale. Over the last several years, it has become very common for home owners to have a second mortgage on their home. In the case of a short sale, if the sale price doesn’t satisfy the balance owed to the first lien holder (primary mortgage), the second lien holder will receive nothing. Even in a foreclosure situation, the second lien holder often receives nothing or just pennies on the dollar. This is the risk they take and also a reason why it is very hard to get a second mortgage on new loans these days.
In an effort to recover some of their money, second lien holders have supposedly been requiring the seller to pay them some sort of fee outside of the closing and off the HUD-1 settlement statement. This “off the books” payment is illegal. However, it puts the seller in a tough position because the second lien holder can kill the short sale by simply not agreeing to it. It also puts the agent in a difficult position because we want to represent our client in the best way possible but are not willing to jeopardize our license to do something illegal.
Of the 1810 Marietta, GA homes for sale in, 180 (ten percent) are being offered as a foreclosure/short sale opportunity. Also, of the 619 Marietta, GA homes sold in the last quarter of 2009, 114 (18.4 percent) were sold as foreclosures/short sales. Foreclosures and short sales are going to be with us for a while and it is important for both buyers and sellers to be aware of the process and potential pitfalls.
For more information on short sales and foreclosures in Marietta, GA, contact me.
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