The Short End 1

Chess board imageEven amidst the current debacle of robo-signers and foreclosures, many are still favoring short sales, even though they may be guilty of the same processes.  It creates an exit strategy for both the banks and homeowner without the cost or consequences of going through a full foreclosure.  A short sale scenario occurs prior to a property going into foreclosure.  A short sale may not be possible for all homes, thus many have considered strategic defaults.

Both banks and the seller will need to sign off on a contract.  In some cases, there are additional provisions in the contract that allow the seller to keep the property on the market and to continue to entertain further offers.  Because of the approval period, a short sale purchase may generally take longer to close versus other purchase types.

Sellers need to be informed of several conditions of the short sale.  There is a distinct difference between the lender accepting a “Release of Mortgage” or “Satisfaction of Mortgage” and the possibility of the lender trying to collect the deficiency balance.

There are many factors that come into play for obtaining either condition, and on what terms the bank will approve a sale.  A short sale will affect your credit worthiness.  However, many say that owners who have sold their home in a short sale could possible recover their credit worthiness in a few years.  It is best to consult with an accountant and attorney in addition to your broker to understand all the possible effects of a short sale.

For buyers, purchasing a short sale can be a worthwhile opportunity.  There is an investment of both time and money that buyers have to be prepared for.  The time for a lender to approve a contract can be anywhere from a few weeks, depending where in the process the homeowner is, and terms of purchase versus principal balance.  Any funds committed towards inspections, attorneys, lenders and other related items may not be refunded.  Provisions can be included in an offer to protect the buyer from spending funds prior to an approval.

In some cases, the seller is still occupying the premises, which may add a sense of security and deterrent for possible damage to the home, but an inspection of the premises prior to closing is always recommended.

During the approval period, the property could remain on the market and entertain additional offers.  This may put buyers in a multiple offer situation.  Having a strong offering package can help, especially if the property has not received an approval from the banks; a strong offer is not solely just the offering price, but rather the entire contents of the offer and presentation.

Understanding the unique factors relevant to a short sale can lead both buyers and sellers to a successful transaction.

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Sherwin L. Sucaldito, REALTOR®, GREEN, ABR, CRPM
The Institute of Luxury Home Marketing
Green REsource Council, GREEN
Accredited Buyer’s Representative , ABR
Certified Residential Property Manager, CRPM

Creative Commons LicenseThe Short End” by Sherwin Sucaldito is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

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