What Is A Short Sale?
As a real estate agent in Melbourne, Florida specializing in short sales, I work with buyers to help them understand the process of purchasing a short sale home. Here are some frequently asked questions:
What exactly is a short sale? The term short sale simply means that the homeowner owes more on the home than its current market value, and the homeowner is facing financial hardship leaving them unable to pay the difference between the selling price and the amount owed. In this situation, the bank or lenders holding the mortgage must also agree to accept less than the loan balance.
How is it different from an ordinary sale? One big difference is the time required to purchase a short sale home. Once the buyer and seller agree on a price, the offer is submitted to the lender for approval. Part of the approval process involves gathering and reviewing the seller’s financials to verify financial hardship. The lender also requests a Broker’s Price Opinion (BPO), to provide an evaluation of the home’s fair market value. The lender can either accept the buyer’s offer or continue negotiations by making a counter offer. Today, buyers can expect to wait up to 90 days to receive approval, so if a quick closing is required, then pursuing a short sale may not be the best option.
An offer on a short sale is submitted using an “AS IS” contract where the buyer purchases the home in its current condition and understands the seller will not make any repairs. The buyer has an opportunity for a home inspection and can cancel the contract, with their deposit fully refunded, if not satisfied with the inspection results.
Another difference is that all parties involved must sign an ”Affidavit of Arms Length Transaction” form. This means that the buyers, sellers, agents, or lenders are not related, or business associates, or has any special agreements with one another. It also means that seller will not continue to occupy the property as a renter or regain possession of the home.
Why would a bank agree to accept less than full payment of the mortgaged amount? Lenders are often willing to accept less than full payment because the loss incurred from a short sale is far less than the loss incurred from foreclosure.
How common are short sales? Today, 24% of all active listings in Brevard County’s MLS are short sales.
While unfortunate circumstances may have created this growing portion of the real estate market, opportunities exist on all sides. Home buyers willing to patiently go through the approval process, have the opportunity to purchase a home in Brevard County, Florida at a great price, and sellers have an opportunity to avoid foreclosure and its long term consequences.
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