Recently Michael McClure wrote a post on short sales and why, as a buyer, they may not be the optimal option for you to consider. So, what happens if you are a seller and find yourself in the position of needing to sell your home short?
You Are Not Alone
First, understand that the economic downturn has hit many people very hard indeed. If you are confused as to what the term “short sale” means, here’s the Wikipedia entry:
A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current debtor. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower.
Many folks knowingly bought more than they could afford or were lured into purchasing beyond their means. Either way, many homes are now worth less than the mortgage balance currently owed. In some marketplaces, short sales make up over half the active and sold properties in the market.
What Do I Do Now?
You need to sell your home, but you owe more than the market will pay for your home. There are a few things you can do at this point. What I suggest is that you contact a real estate agent to handle the marketing, purchase negotiations and typical real estate transaction coordination. The real estate agent you ultimately work with should have a list of folks that handle short sale negotiations with the bank.
There are four kinds of short sale specialists that I’ve bumped into:
- Title company short sale division (a division with a title company that offers to handle short sales for agents that utilize their services)
- Real estate attorneys
- Short sale specialists
- Short sale specialist real estate agents
Of the four, my selling clients have predominantly chosen to use a real estate attorney or a short sale specialist. The real estate attorney route is “hit or miss” depending on the tenacity and eye to customer service that your particular real estate attorney brings to the table. The short sale specialist I work with has successfully closed every short sale my team and I brought to him.
Short Sale Details
Typically, my short sale listings proceed like this:
- Comprehensive highest price analysis leads to correct pricing on initial listing of the property;
- Upon listing, short sale specialist meets with the sellers to collect all the information necessary to negotiate with the lender(s);
- Showings are scheduled and offer(s) received;
- When you have the right price on a property, buyers WILL materialize;
- When a purchase agreement is negotiated and accepted by buyer and seller, the short sale specialist refers it over to the lender(s) for their approval;
- Inevitable “delays” then occur as various lenders gather or re-gather information;
- Don’t forget that there will be at least a couple of appraisals completed: one for the seller’s lenders, and another for the purchaser’s lender, and
- The closing happens.
OK, so six bullet points, and there is a lot of detail and minutiae that I’ve skipped to keep this post at a reasonable length, but this is the typical lay of the land for a short sale. The time-line for a short sale is extremely prolonged. Where the typical transaction in Southeast Michigan is 30-60 days from accepted purchase agreement to closing, a short sale transaction can drag out for longer than 9 months!
If you would like to learn more about selling your home via short sale, please contact me directly.