WHAT IS A SHORT SALE?

 

Homeowners ask me this question quite a bit which is why I'm adding this page on Short Sales.  A Short Sale is where a Seller tries to sell their home for less than what they owe the Bank.  As an example, let's say that John and Shirley bought their home in 2005 for $300,000 and financed 100% of the purchase price.

 

4 years later they find that they have lost their jobs and have learned that the most they could sell their home for in today's market is $225,000.  The problem is, they still owe pretty close to $300,000 to the bank.  That's a deficit of nearly $75,000.

 

Here is where a Short Sale comes into play.  A seller will then contact the bank to see if the bank would look at the possibility of their home being sold in a Short Sale.  Most lenders require that you be in some kind of financial bind to OK a Short Sale.  This is where having a Realtor with experience is a good idea because they can help assist you through the qualification process.

 

The bank typically wants to see a hardship letter (a letter stating why you can't make your payment anymore) and copies of all your bank records which shows that you do not have the money in the bank to make your payment any longer.

 

Once the bank has made a review, they will let you know if they would consider offers for less than what is owed the bank. (thus the name Short Sale)   Your realtor will then list the property and begin advertising it.  Once a buyer brings an offer, your realtor will review the offer with you and if accepted by you, it will then be sent to the bank for review and approval.

 

This process takes quite a while to complete, especially with the first offer presented.  The bank will most likely order an appraisal to be done on your property.  If the appraisal comes back close to the contract price that you and the buyer agreed, the bank may give the go ahead for a Short Sale to proceed or counter offer at a price closer to the newly appraised value of your home.

 

A few things to keep in mind are:

  1. Short Sales typically take 2 to 6 months depending on how well the Bank that holds your mortgage has things together.
  2. There are no guarantees that a bank will accept an offer for less than what you owe.
  3. Short Sales will lower your credit rating, however it will not be as bad of mark on your credit rating as a full blown foreclosure is.
  4. Each bank has their own criteria for considering a Short Sale.
  5. You typically must be behind in your mortgage payments for most banks (not always) to consider a short sale.

If you find yourself upside down on your home and are in a financial pinch, a Short Sale can really help to get you out of a bad situation.  I cannot stress enough how important using a Realtor with experience is.  If you would like to discuss your options, I would be happy to answer any questions you might have.  My cell phone is 541.390.7878 or feel free to drop me an email.