Short Sale? What is That?

This home is a Short Sale. So.....  what does this mean to you as a Buyer or Seller?

A Short Sale means the the mortagage balance on the home is more than what the current value of the home is.
The Short Sale process is a little different than a normal transaction. Since the Bank is taking a loss on the home the process must go through their Loss Mitigation department. Some Banks are actually developing Short Sale departments to handle the volume of Short Sale requests.

1.   The first step is to have the owner work with their Realtor agent and give the Realtor written approval to speak directly to the bank.
2.    The Bank reviews the request and once approved the house can then be placed on the Market For Sale.
3.    A Hardship packet must be prepared by the owner and the Realtor submits the Hardship packet to the bank
4.   Once an Offer is obtained it is sent to the Bank for their review. This process takes anywhere from 2-6 weeks. Some Banks require the hardship packet to be submitted with the offer as they will not review hardship packet until they have an offer.
5.   The Bank typically gets an appraisal on the property and other Broker Price Opinions (BPOs) from other agents on the value of the home.
6.    The Bank then approves the hardship packet and offer or more than likely negotiates new sales terms on the existing offer. This can take 1-2 weeks.
7.     Once Buyer or Buyers (more than likely more than one offer placed on property) approves negotiated sale terms an accepted offer is then approved and Escrow is opened.
8.     Once Escrow is opened the Bank typically wants it to go real fast, however the Buyer's lender has their timelines and today's Market is usually dictating 45 day escrows.
9.     From this point forward it is typcally like a normal transaction.

A couple of things....
1.     If their is more than one Lender for the home owner, it is much more difficult to get the Short Sale approval. This is because the Bank who has the 2nd Mortgage or ELOC will typically only get anywhere from $2,000-$10,000 for their loan from the Bank who has the 1st Loan Mortgage. The 2nd Bank usually plays hardball for awhile and delays the process because they are holding out for more money. There is alot of negotiating that goes on between the 1st Bank and the 2nd Bank. The Realtor is typically the one in the middle keeping the transaction alive and trying to get the two banks to come to a negotiated agreement.
If there is a 2nd or 3rd Bank involved, it usually adds a few more weeks to the process.
2.     Although Short Sales have been selling in the past 6 months, the last month or so has seen some significnt Market changes which have forced banks to deal more openly with owners in Short Sale situations. It is definately more economical for the bank to close a Short Sale transaction than have it go into Foreclosure and then have to deal with selling it as an REO (Real Estate Owned(e.g. Bank owned)).
3.    The Bank has a higher potential  of bringing in a great price for the home while it is owner occupied in a Short Sale situation.

Robert & Christy have experience working with Short Sales either Listing or with buyers. Feel free to give them a call in confidence. They are extremely helpful, knowledgeable, professional and sensitive to your needs. Call 951-532-1889.