What Is A Short Sale?
You're looking at foreclosure, the bank is calling day after day and there simply is not enough equity to sell your property in the current real estate market; so what do you do? There are many reasons a homeowner may loose a home and have to face the facts of foreclosure or a real estate short sale, from loss of job to divorce to simple economic times. There are alternatives to bankruptcy or foreclosure proceedings. One of the avenues is called a "short sale". So what is this short sale?
When lenders agree to do a real estate short sale it means they are accepting less than what is actually owed on the property. Not all lenders will accept short sales or lower than owed payoffs especially if it makes more sense to them to simply foreclose. Keep in mind that also not all sellers will qualify for a short sale, the seller will need to prove to the bank that he or she can not afford the home usually via income tax statements and monthly expenses plus a letter of hardship.
If you are considering buying a short sale property and want to know how to do a short sale consult with your agent or contact us. The main thing is to keep in mind it's a process, the banks will not be moving fast with offers, typically you can expect 1 1/2 - 2 1/2 months for a response and even then it may not be a yes.
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Do You want To Discuss A Short Sale On your Home?
A list of typical items your lender will need for a short sale:
- Letter of authorization for your agent to speak with the bank on your behalf
- Net sheet showing the possible sales price less all fees so they can see their bottom line
- Hardship letter stating why you can not afford the property
- Copies of bank statements
- Proof of income
- CMA that shows the homes value in the marketplace
- Purchase agreement
Mortgage Forgiveness Debt Relief Act Of 2007 will tell you about any consequences that may apply.
Buying A Short Sale Home:
The upside for buyers on a short sale is you may get an instant equity position in a new home or property. If you are indeed looking for short sale homes for sale keep in mind the waiting period. With a short sale as described above the bank is the one who needs to decide based on their own independent appraisal and the monies they have invested how much if any of a loss they are willing to take.
When looking at short sale homes just because a property is being offered at let's say $175,000 when it sold for $275,000 a year ago does not necessarily mean you can get it for that. Short sale home values are based just like other homes for sale, a Realtor or appraiser looks at the property and establishes value based on the current market conditions and similar properties sold and arrives at an asking price. The asking price is simply what the agent and homeowner feel the value is, it has zero to do with getting it for that offer price, your offer still needs to go to the bank for review and it's up to them and the assigned negotiator, you may be accepted, rejected or countered much higher than even the asking price.
Time line is another thing to keep in mind, short sale offers typically take from 60 - 90 days or longer to get a response from the bank and the response may not even be a yes. Keep these items in mind when shopping for your new home or investment property. See our blog here with more great tips.
In the end let me say don't worry, I understand the frustration of the questions you may have and where you go from here. I can say there is help; you can come out of the unfortunate situation and build credit back up and again be a homeowner. We have helped many homeowners in the same situation and we can help you with your short sale. We will deal with the bank on your behalf and get the property moved so you can move forward with your life. Give me a call today at (612) 282-7653.