What is a short sale? A short sale is when the value of someone's home becomes less than what they paid for it (not uncommon in today's market where 1/3 of all homes sold are short sales). This process is undertaken by those that wish to avoid a foreclosure. A short sale, despite the name, can take several weeks, let alone months, to complete the transaction. This is for several reasons.
- Banks used to not invest very much time or money into the short sale department of the business because there is not much (if any) profit in handling a short sale. The bank is agreeing to accept less than what they originally gave to the home owner for the mortgage. Banks are just now in the starting phases of perfecting their Short Sale department (but it is still in the early stages), allowing some banks to process them faster than others.
- 2 loans on a property = twice as much work and negotiating. If someone took out either a second mortgage on the property with another bank, a home equity line of credit, or for any other reason has another lien (original mortgage is the first lien, any other debts would fall second, third, etc.) on the property, this can add a substantial amount of time it takes to negotiate with the two banks because both are not fighting one another to recieve as much back as they can.
- Home owners are not up front with all information, delaying the process further. It is not that uncommon where a home owner just wants to be done with the house and feels a foreclosure will just be easier. If the home owner starts to feel this way during the short sale process, it can ruin a deal with a prospective buyer.
Before anyone starts a short sale, and before they start signing any documents, I would HIGHLY encourage anyone that feels a short sale might be right with them consult with a tax attorney that is familiar with real estate laws, state tax laws, and federal tax laws. Obviously you or someone you know that needs help, probably does not know an attorney that specailize in tax and real estate laws, so we strongly recommend you (or your friends/family) contact a local, veteran real estate agent. Real estate agents are a wealth of knowledge when it comes to the community, and professionals that work in the community.