Just how many of us really know what a short sale is and how does it work? Oftentimes homeowners whose mortgage payments is upside down thought of putting their homes on short sale, however a homeowner does not necessarily have to be delinquent in his mortgage dues to put his house on a short sale.
Though payment delinquency could be a factor but that’s not the only legitimate reason for putting a property in a short sale, you could either be facing divorce, just lost a job or for medical reasons that would affect your steady income.
But what really is a short sale? Let us define it and know how it works? A short sale is a property that sells for less than the balance owed on its mortgage. It happens if the mortgage balance of the property, a house or even a vacant lot is greater than its market value.
However there are still a lot of misconceptions regarding short sale, one of which is that the bank would rather have your property foreclosed than be put in a short sale. Actually, the bank would prefer to have it in a short sale than in foreclosure because it would cost them more money with each transaction in foreclosure and rather less in a short sale.
Another common misconception is that it is impossible to get approval for a short sale transaction. But in reality, short sale has become more streamlined and lenders have become more knowledgeable and are willing to work with homeowners to close these types of transactions.
Also, most people think that a short sale takes a very long time to close, but that’s not always the case. Lenders would do their best to refine the short sale process to close the deal in less time. They themselves would want to sell the property right away because each time that passes is money lost.
People think that buyers are not interested in buying short sale homes. Well, this is quite not true since most buyers nowadays are specifically looking for homes in short sale lists.
Homeowners who put their homes in short sale will not be able to buy a home in five to seven years. Not really, because it all depends on the lenders. Actually, there were people who purchased new homes in just 24 months after putting their previous homes in short sale.
Homeowner cannot afford to pay for real estate agent who will process the short sale. Wrong again, it is the lender and not the homeowner who pays the agent his/her commission. The seller does not have pay the realtor’s commission.
And what exactly does the realtor/agent has to do with the short sale process? Well, the agent determines the type of the short sale, from Fannie Mae HAFA to regular, non-GSE HAFA, to a traditional short sale, etc.
He/she gathers necessary papers and documents then submits the short sale package to the bank. But sometimes they might get the services of a third party to do this part.
The agent helps the seller price the short sale home. The price should be attractive for prospective home buyers and should be enough to satisfy the bank. Then puts the home in the market and submits all offers received to the seller.
Agent also negotiates for the seller, but sometimes if seller wishes for the services of a lawyer he may do so but oftentimes the services of a realtor is enough to negotiate with the bank in behalf of the seller.
Lastly, the agent then submits the short sale approval to the seller; usually sellers want a release of liability and no deficiency to a short sale. But state laws tend to govern the terms in the approval.
One useful tip of advice, seller should always get legal and tax advice from a lawyer before completing a short sale.
About the Author,
Georges Kfoury is the founder and Chief Executive Officer of Leaderscorp Financial Inc. headquartered in Rancho Cucamonga, CA, a leading provider of mortgage financing dedicated towards providing affordable home loans. He founded the company way back 2003 from a ground level, without having the mortgage background. In spite of this, he was able to immediately take the company a level of generating annual income ranging from 8 to 10 million dollars.