The Short Sale Questions

What’s a short sale?

A short sale is when a lender accepts a “discount” on a mortgage to avoid a possible foreclosure auction.  The lender is willing to accept a lesser amount than what the owner owes on the mortgage. This means that not only are you writing an offer to the owner for acceptance but to the lender as well.  An example: A homeowner, who is facing foreclosure, has an existing mortgage of $150,000. The buyer’s offer is $90,000 and should it be accepted, this amount is considered to be full payment for the loan. This is a short sale.

Why does a short sale take so long, you ask?

The delay in response is because the lender requires the owner to prove that they cannot make up the shorted difference.  In times past, the expectation from the lender was that the owner would pay the lender that difference.  However, in this economy and market, that may not be the case.  So, the bank requires bank statements, tax returns, W-2s and other various documents to verify that the homeowner has no additional monies.

Why is the lender willing to accept a short sale, you wonder?

The main reasons (1) Banks do not like excess inventory and bad loans on their books so, if they see an opportunity where they can sell the property without a huge loss, they will do it.  (2) Lenders know they could lose a lot more money if the property goes to auction. There are so many fees involved if the property goes to auction, that they would be better off taking the discount beforehand and be finished with the headache of it all.

With short sales, getting an acceptance is not an immediate or quick response.  And, neither agent (listing or buyer’s), can rush the process. The buyer must understand that patience will need to be exercised.

If you are searching for a Realtor to help you sell your home, contact one of our agents at www.ExitDayton.com.