Frequently Asked Short Sale Questions
A Short Sale is when a bank or mortgage lender agrees to accept less than the full amount owed on the mortgage.
A Short Sale will be considered if:
1. Your total loan balance is greater than the value of the home (including all loans if you have a second mortgage, or a line of credit).
2. You have experienced some type of financial hardship. The hardship could be related to job loss, cut hours, medical bills, divorce, or any number of things. Essentially, if anything has changed in your financial situation since the time that you originally got the loan.
3. There is an offer to purchase the property. We will need to find a qualified buyer in order to request a Short Sale.
1. Being proactive in pursuing a Short Sale will benefit you in the future when you purchase your next home. A Short Sale is more favorable than having a Foreclosure on your credit report and can affect your ability to get another home loan in a few years.
2. You can avoid being surprised by the foreclosure process, like an unexpected eviction. Many times the foreclosure process will be postponed while the bank considers your Short Sale. Either way, working with an experienced Short Sale agent will allow you advance notice on the status of your home.
3. You may qualify for a financial Short Sale incentive from your lender.
4. Having control over the sale of your home will bring a sense of closure to the situation.
1. Asset Management. If the bank forecloses on your house they are going to have a vacant home that needs to be sold and may be a target for vandalism. By working with you on a Short Sale, they get the house sold, while you are still living there maintaining the property. Even if you are not still in the property, working on the Short Sale allows your Realtor® to do some of the work they would have to do in marketing the property for sale.
2. Banks are also under some pressure from the government to show that they are making efforts to assist homeowners. There are incentives to both the lender and the homeowner to work on a Short Sale.
3. Ability to lend. From the time you stop making your mortgage payment to the time the house gets sold, the bank has to report your loan as a non-performing asset which affects their ability to make new loans. A Short Sale can help get a bad loan off their books much faster than the foreclosure process.
There is never any guarantee about the success of a Short Sale. The banks are always very careful to remind us that the Short Sale process is ultimately voluntary and they don’t have to consider it at all.
That being said, it’s always worth the effort to try. We have a higher than average success rate on our short sales. Probably because we do a very thorough job of building a strong case for why the bank should accept the price that your buyers are offering. From setting the right listing price, to sending the correct and and complete documents, to following up aggressively. Not all Short Sales will be approved, but if it can be done, we can do it.
1. Too close to the Trustee’s Sale. (Foreclosure sale) Some banks say 30 days before, some may consider an offer within 10 days before the sale. It’s always worth asking, but that has been the cause of declining some offers.
2. The BPO may come in too high. The BPO (Broker’s Price Opinion) is when the bank sends either another Realtor® or an appraiser to give an opinion on the value of the house. We have already listed the price at what we believe the value should be, but unfortunately real estate prices are a little subjective. If the person submitting the BPO decides that the home should sell for more, there isn’t much we can do and the home will usually be foreclosed.
3. No one makes an offer. In order for a Short Sale we need a buyer to come make an offer for us to present to the bank. If for whatever reason no one makes an offer on the property, there is no way for the Short Sale to be considered.
The process is still the same, we just have to work with both lenders to request that they each agree to accept less then the full balance on the loan. It can make the process take a little longer since now we are waiting for one or more decision makers, but it’s still worthwhile to pursue.
It’s usually fine. If your home is just in need of minor maintenance like new carpet and paint, that is pretty standard and shouldn’t be an issue. If there are structural issues or considerable damage we may need to look at it as a case by case basis.
Damage to your house may actually be a huge incentive for your lender to agree to a Short Sale. The issue is that a buyer is going to have to get a new loan to buy your house. If it won’t pass their appraisal, they may not be able to make the purchase. There is a whole segment of cash buyers who are specifically looking for homes to fix up. That being the case, it’s probably worth having a conversation about so we can let you know what your realistic options are.
If you have already missed payments, whether they are mortgage payments, car payment, credit card payments, or anything that reports to the credit bureaus, your credit will already be damaged. A Short Sale will not “help,” your credit. It does prevent your credit from being damaged further. By most accounts, a Short Sale is much preferable on your credit report than a Foreclosure. So you are choosing the lesser of two negative reports. When you go to get a loan in the future, we have been told that lenders will look more favorably on Short Sales because you were proactive and cooperative rather than ignoring the situation.