What is a short sale?
A short sale is any transaction in which the net amount paid to the underlying lien holder is less than what is owed that lien holder. In other words, if you owe $200,000 on your home, and you can only sell it for $150,000.00, then you would be selling your property short. This would also be the case if the home sold for $200,000.00 because of the associated closing and brokerage fees, taxes, and HOA dues and transfer fees that may enter into the transaction.
How long does it take to complete a short sale?
The time that it takes to receive a letter of agreement from the bank depends not only on the bank that services the loan, but on the investor who backs the note, and in some cases, the mortgage insurance company that the investor used to insure the note. Most short sales are approved within 60-90 business days, but some have gone as long as 6 months. There is no guarantee that a short sale will close quickly.
Why does it take so long?
The industry was not prepared for the market to be hit as hard as it was, and the negotiators at the banks (those are the guys who work with the investors to come to an agreement) literally have upwards of 800 to 1000 files sitting in their cubicles and offices. Banks typically do not return phone calls, and their phone systems are a navigator’s nightmare, eating up valuable time. Some of the banks know us by name now, which makes it easier, but for the most part, it’s simply because the lenders are overwhelmed.
Why so much paperwork?
Lenders have not adopted a standard, and they have teams of less than experienced people assembling ad-hoc systems to collect the required information. Each lender may have their own forms that must be completed according to their policy, which translates to more work for you and me. We currently have forms for many of the lenders already on file, which makes setting up your file for transmission to the bank much less painful.
I am a real estate agent and I need to list my home for sale. Can I do that?
You need to check with your broker, but in most cases, yes, you can, but you will not benefit from it. Lenders will not allow you to collect a commission if you are connected to that property.
Do I need to be behind on my payments to do a short sale?
No. You do not. The bank cares about two things, 1) the market value, and 2) the offering price. If your intentions are to walk away from the home because you cannot afford to continue making the payments, but you aren’t behind, then you can put it up for sale and ask the bank to allow the short sale. There’s no guarantee, ever, that a bank will approve the sale, but banks do not want to own real estate, they want cash, because that’s what they use to make money.
Have a question? Simply ask.