Everything You Ever Wanted to Know About Short Sales
It has become a term that has been tossed around a lot in recent years. but what exactly is a short sale? What is involved? How does it differ from a regular sale? Short sales can be a daunting experience but if you have the right people involved and the right information it is not as bad.
What Is a Short Sale
Basically, a short sale is a property that sells for less than the balance owed on the mortgage. In other words, if there is a mortgage balance that is greater than the market value of the home, that property is a short sale. It can also be a short sale in the accepted sales price is higher than the mortgage but not high enough to pay all the closing costs and commissions. The term “short sale” comes from the balance needed to pay off the bank being short. It is by no means or terms a quick or short process.
Are You Guaranteed a Short Sale
Not every property qualifies as a potential short sale. Not every person or family qualifies as a candidate for a short sale. The lien holding bank must agree to grant a short sale and are under no obligation to approve a short sale. A bank will grant a short sale if the bank feels it is in the bank’s best interest to approve the short sale. It is in the bank’s best interest to approve the short sale if the bank will make more money through the short sale process than through foreclosure. It is estimated that banks might save 25% to 30% on foreclosure costs to grand a short sale over a foreclosure, but some investor guidelines make it more profitable for the bank to foreclose.
What Is Necessary for a Short Sale
Most short sale transactions are handled by real estate agents who specialize in short sales. Some agents choose to negotiate with the bank holding the mortgage themselves. Other agents will team up with an attorney and let them negotiate the short sale with the bank. There are 4 essential ingredients to a short sale; however, strategic short sales (those without a hardship) are also possible. If initiating a short sale you will need the following:
• An underwater home
• A willing short sale bank
• A seller with a hardship
• A buyer willing to purchase the home
What Role Do Real Estate Agents Play in a Short Sale
You should always make sure that your real estate agent knows what they are doing and have experience with short sales. Some aspects of the process are very similar to general real estate sales but it can vary drastically in other aspects. If a short sale is not successful you can lose your home to foreclosure. This processes should not be handled by a novice agent.
Inexperienced real estate agents have been known to throw homes on the market that will never close as a short short sale. That’s because the agents do not always qualify the short sale sellers. Other times, agents will place unrealistic price tags on the short sale, which the bank will never accept, or accept the first offer that comes in knowing it will close at the offered price. None of these will help keep your home from foreclosure.
The following is what the agent should do in the short sale process:
• Gather the required paperwork and submit the short sale package to the bank. Sometimes agents hire a third party to negotiate the short sale.
• Help the seller to price the short sale home. The price needs to be attractive enough to entice a buyer to wait for short sale approval but high enough to satisfy the bank’s payoff of the outstanding mortgage.
• Put the home on the market. The agent must submit all offers received to the seller. Some offers will be lowball offers.
• Negotiate the short sale. Sometimes sellers/agents will hire a lawyer to negotiate the short sale.
• Submit the short sale approval letter to the seller. Most sellers want a release of liability and no deficiency to do a short sale.
A short sale is one of the most important tasks a real estate agent can take on. If the process is not handled properly the seller can lose their home to foreclosure. We at Team Johnson take this responsibility entrusted to us very seriously and work very hard to make this process as easy as possible for our sellers. We have successfully negotiated and closed many short sale transactions in the north Florida area over the past years. We have never failed to successfully negotiate this process. If we can be of any help please give us a call at 904-217-3711 or email us at firstname.lastname@example.org
Team Johnson Alta Realty Company
St. Augustine, FL 32086
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