Here's
where I confess that I am by no means an expert on short sales, and say
that the banks and mortgage companies are not so sure how to handle
these, either. Two years ago, most of us had not heard the
term. In 2008 the corporate owners are trying to figure out how
to best handle this growing phenomenon. Also, as with all
of the information I present on this site, all of my experience is
based on Georgia real estate.
Basically,
a short sale is when the mortgage company or bank agrees to a loan
payoff that is lower than what is owed on the property.
I'll try to cover this complicated situation from the buyer's and the
seller's point of view, and will try to update as the market changes.
SELLER'S POINT OF VIEW
If you are a seller who is in default on your loan (first or second
mortgage, or both), financial experts advise that you contact your
lender(s) and try to negotiated more favorable terms to enable you to
remain in your home and make the payments. Not all lenders will
agree, but there's nothing to lose in trying.
If the lender refuses to negotiate the terms, or if you will be unable
to continue to make the payments under any circumstances, you should
ask your lender for a seller package to request approval for a short
sale. These are detailed documents which clearly demonstrate your
inability to make your mortgage payments. Since this is new
territory for lenders, each lender approaches short sales
differently. In many cases, the lender will not make a commitment
until the home is appraised, listed, and a contract is presented to the
lender. That leaves the seller, buyer, and agents in limbo,
sometimes for several weeks. Other lenders will agree to a short sale
and will disclose to the seller and listing broker the minimum amount
that would be accepted.
BUYER'S POINT OF VIEW
You may have gathered that the market is being flooded with short sales
and foreclosures. On one hand, buying a foreclosure is more
predictable, but no picnic. You'll usually get a "yes" or "no"
answer from the lender's assets manager within a week. With a
short sale, be
prepared to wait up to several weeks for an answer....and the answer
may
be "no." Keep in mind that lenders are already losing money, so
don't expect them to give the house to you.
As with foreclosures, short sale homes are sold "as is" with no
repairs. You'll want to have an independent home inspection,
termite inspection, etc., and be willing to walk away if the property
requires more work and money than you are ready to give.
Some corporate owners will pay closing costs, but many will only give a
concession in a price reduction. It's a safe assumption that a
downpayment assistance loan will not work with most short
sales or
foreclosures. Expect to pay 1% to 3% in earnest money.
Read my advice on buying a FORECLOSURE, because some of the
advice also applies to Short Sales.