Kristi Hernandez

Broker

Understanding Short Sales

 

By Keith Loria


No matter where you turn these days, short sales
are still a hot topic. However, if you’re in the process of looking for a new
place to call home, the term ‘short sale’ shouldn’t scare you off. In today’s
market especially, pursuing a short sale can be a unique competitive advantage.


In its simplest definition, a short sale is when a home is sold for less
than what is owed and the bank forgives the excess debt. Although this was once
considered taboo by banks, with the housing climate that exists today, many
lenders will gladly go this route rather than having the homeowner join the tens
of thousands who have let their house fall into foreclosure.

A home that
is listed as a short sale is more likely to be kept up, as the seller still
wants to get as much money as they can and attract buyers to the home. But
beware. If there are improvements that need to be made to the home, even if they
are necessary to get a loan, it is often unlikely that they’ll get
done.

According to Irvine-based data tracker RealtyTrac, in the first
quarter of 2012, short sales grew 25 percent from a year earlier, hitting a
three-year high in the process. In fact, short sales seem to be turning into the
preferred method for many lenders. Owners unloaded 109,521 homes during the
first three months of the year for less than what they owed on the
mortgage.

Unlike in a foreclosure, the bank does not own the property in
a short sale. However, because the bank must approve the sale, it will seem like
the buyer is purchasing the property from the bank.

The entire short
sale process hinges on the hope that the bank will approve the sale, take the
loss and eliminate the costly process of foreclosing, clearing, and reselling a
home.

A short sale can often take longer than a traditional sale because
of the documentation required and the sign-off needed by the lender, so make
sure to work with an agent who has experience in short sales and can help
expedite your transaction and protect your interests.

By checking recent
home sales in the area to get a better idea of which properties are selling,
your agent can work with you to come up with an appropriate price that will more
likely be approved by the bank.

Even though banks lose money when it
comes to short sales, lenders almost always lose more when they foreclose on a
property, making short sales a practical option in today’s market. With so much
inventory on the market from foreclosures, it could take years before the bank
sees any money.

One important thing to keep in mind is that with a short
sale, there is no leniency with the closing escrow date and a buyer must close
on time. Because of this, it is important to take care of all loan paperwork
immediately after opening escrow.

For more information about short
sales, contact our office today.

RISMedia