Driving around town you can’t help but see the many houses with ‘for sale’ signs in their yards. There are many types of sales available right now; regular sales, foreclosures and bank owned sales and short sales. Regular sales typically involve a seller who has equity in the home and the ability to address inspection concerns. Foreclosures and bank owned properties are those that have been foreclosed and the bank took possession of the home. The new owner never lived in the home and will typically allow inspections but may not make any repairs. A short sale is a sale that is contingent upon the lien holder agreeing to accept less than the amount owed on the mortgage, making the seller ‘short’ on the amount needed to satisfy the mortgage amount owed. These homes are sold ‘as is’ with the buyer being responsible for any necessary repairs.
For some sellers, a short sale is an alternative to foreclosure if they are having trouble keeping up with their mortgage payments. The mortgage company will need to be notified if you are facing a financial hardship through job loss, illness or even divorce. Many banks are willing to consider a short sale as the foreclosure may cost more than the amount of the difference between the market value of the home and the ‘short’ amount.
It is in the seller’s best interest to contact a Realtor who is experienced in short sales to list and market the home. The Realtor, as well as an attorney also experienced in short sales, is a contact on the seller’s behalf with the mortgage company throughout the process. Each bank has their own forms and will require copies of bank statements, tax returns and a hardship letter.
Once an offer is received, it is sent to the bank, which will have an agent acting on their behalf determine if the offer is market value or if the lender will counter offer. Once the offer price has been agreed upon, the lien holder presents the offer to their investors, who decide to accept or deny the lesser amount. Once the amount is approved, it is time for the buyer to conduct their inspections and apply for their mortgage to purchase the home.
The short sale approval process is becoming quicker than it had been but still requires patience from all parties. While a short sale can be emotionally difficult, it keeps the seller from facing a foreclosure and that, in turn, leaves one less vacant house in our town.