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What Is A Short Sale?

Short Sales

short saleI work with clients from all over the United States.  In addition, many of my clients are from a foreign country. I have noticed that many people are confused about what exactly is a “Short Sale.”

A Short Sale is a situation where the net proceeds from the sale of a property are less than what is owed to the bank or mortgage company.  The Seller will receive no funds from the sale and all lien holders must agree to the transaction.  The mortgage company’s goal is to get the highest amount they can in order to reduce their loss.  The negotiation can take a good amount of time, and it is not uncommon for the process to take 60 – 90 days.  It is very important that both the Buyer and Seller be aware of this.  If a Buyer wants or needs to move quickly then they should not consider a Short Sale.   “Short sales should be called long sales,” said Leslie Tyler, vice president of marketing for ZipRealty.  The mortgage company controls many of the specifics of the sale such as what can/can not be included in the Contract and when the Closing must occur.

Here are 5 facts common to most short sales:

  1. Lack of communication or status updates from banks.
  2. You can find deals in short sales, but don’t expect a steal. Buyers should make their offer based on comparable homes that have sold recently.  Be aggressive, but not ridiculous.
  3. The sale is “AS IS.”  The Seller will not give a credit for repairs.
  4. There is no guarantee with short sales. Have a back-up plan and continue to look for other properties that might interest you.
  5. A short sale is only a bargain if it’s a home you truly want to live in.  Remember that it is not only about price.

A Seller must qualify for a short sale.  There are 4 requirements that the Seller must meet:Short Sale

  1. The market value of the property has dropped.
  2. The mortgage is in or near default status.
  3. Seller must demonstrate hardship and must submit a letter of hardship.  Examples of hardship include: unemployment, divorce, medical emergency/sudden illness, bankruptcy, death.
  4. Seller has no assets.  If the lender discovers assets they may not grant the short sale because the lender feels that the seller has the ability to pay.

Sellers must remember that a short sale will show up on your credit report and will affect credit ratings.

Sellers should always seek the advice of a lawyer before pursuing a short sale.  A real estate agent cannot give legal advice.

For more information please contact me at (305) 329-4929 or solovay.m@ewm.com

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