What is a short sale?
Short Sale:
A short sale happens when a homeowner owes more than market value for his/her home and has a hardship that is impacting his/her ability to pay the mortgage. A short sale is a step before foreclosure. The bank must agree to the transaction and if they do they pay all closing costs to settle the debt.
· Homes are priced similar to Foreclosures but in most cases they are occupied and better kept than foreclosures
Seller Requirements:
· Must be able to prove a hardship
· Provide financial statements as required by lender
· Usually the mortgage is past due
Note: It is important to conuslt with an attorney who specializes in short sales or a tax accountant to understand the tax and legal issues.
· Offers must first get presented to the buyer and with the buyer approval they can be submitted to the bank.
If the bank is receptive to short sale they will order a BPO (broker price opinion) and assign a negotiator.
Usually the negotiator says either yes or no to the offer but they can counter back with a higher price
If the offer is accepted a letter is generated with the bank terms
Timeframe:
· Usually 30 days to 6 months to settlement
· Most often, a short sale involves more than one loan. If the 1st and 2nd loans are with the same lender, the process is easier.
· Mortgage insurance companies also need to agree to a short sale.
Buyers
If you are thinking of buying a short sale you are the best candidate if you do not have to have your new home immediately and can be patient through the process.
After your offer:
· Expect at least 30 days to hear anything
· Bank then “might” open a file and begin the process to determine if a short sale works for them
· It may take up to 6 month to close or it may not close if the back will not allow a reduced payment to settle the debt.
The payout is that if you can make this work you will get a home usually in better condition than a foreclosure and at similar prices.
