Short Sales: Seller approach
What is a Short Sale?
When a property needs to sell quickly a property is sold at a price lower than the amount the homeowner owes on the mortgage (short Sale), and the homeowner’s mortgage lender must agree to the “short” payoff. The short sale often happens just prior to a foreclosure, and a lender might accept a short sale. Some of the conditions are that the borrower cannot continue to make the monthly loan payment, does not have enough money to pay back the full balance of the loan and needs to move out of the property.
Why sell through a short sale?
A Homeowner might pursue a short sale if they can no longer pay the mortgage, are at or near bankruptcy, and need to move from the property. This will allow them to avoid a foreclosure, and may alter Bankruptcy plans. With a short sale, the impact on the homeowner’s credit record might not be as bad as a foreclosure in some circumstances.
What are the benefits of a short sale?
- Home Owner/Seller: avoids foreclosure and receives another opportunity for a graceful transition into more affordable housing.
- Mortgage Lender: mitigates its losses by avoiding the process of foreclosing and reselling the property.
- A Buyer: Gets to purchases the property at a fair market value. The buyer also may avoid some of the risks of buying foreclosed properties.
What are the negatives of a short sale?
- A short sale could take longer than a traditional resale because the lender has to approve the sale and the buyer must wait for the lender’s approval.
- The property will be bought on an “as is” basis.
- The approving lender will really agree to pay for any extras that a regular seller would normally agree to. This could mean higher closing costs for buyer. (For example, the buyer covers the cost for inspections and repairs).
What are the reasons the mortgage lender will not approve a short sale?
- When the homeowner still has money to pay for the mortgage.
- When the payout from the private mortgage insurance to the lender could reduce the loss enough to choose to foreclose the property.
- The property title is not clear, possibly due to subordinate liens.
- The homeowner has filed the bankruptcy.
- The mortgage lender initially approved the short sale but the homeowner refused to make a contribution to help reduce the lender’s losses.
Are you behind in mortgage Payments?
- A short sale can avoid foreclosure and receives another opportunity for a graceful transition into more affordable housing.
- If you are behind and you initiate the conversation it is always better than waiting too long.
- A Short sale will delay foreclosure until after all offers are considered.