Guide to Buying or Selling a Short Sale

Dated: 07/12/2020

Views: 432

    

What is a short sale?  This is when a home sells for less than the mortgage loan balance.  All short sales are subject to the current lender's approval.  Approval is hinged on the hardship of the current owner and market value being verified as being less than the mortgage.  

The Buying Side of a Short Sale:[1]

It is important for perspective buyers to under stand some important facts about short sales.

1.       If you are considering a short sale, be prepared to wait. Banks typically take two, three or more months to approve them. Ironically, once approved, you get a 30 day deadline to close.

2.      All short sales are sold "as is." This does not mean you skip your inspection, but it does mean that the current owner cannot cure the leaky water heater, the outdated electric panel, or any other finding. Your best remedy is to have your price reflect the condition. That said...

3.      You can't "steal" a short sale. Banks will have the home evaluated by an independent appraiser or broker, and they'll accept market value with some adjustments down. But they won't accept a sweetheart discount price. They are trying to mitigate a loss. They are good deals, but not steals.

4.      You will get clear title.  Once a short sale is approved, allowances are made to clear all liens and back taxes by the current lender.  No financial encumbrance can survive the closing.

One question that home buyers should ask is who is negotiating with the seller's banks. If the seller's broker or lawyer is dealing with their lender, the buyer has a right to know if they have any experience at this, if there is a second mortgage also being dealt with, and how the short sale process is going at different intervals. I am often asked who the lender is, and while that is fine, it seldom has much to do with whether or not the process will be smooth or if the price will be accepted.

It is not unusual for the bank, when they finally render their decision, to try and negotiate.  The buyer should be prepared for a counter offer, especially if their initial offer was on the low side.

Short sales are going to remain common for some years to come.  They should neither scare buyers away nor should they be viewed as steals by speculators looking to make a flip. They essentially constitute a wait for the buyer.  For the sellers, they represent an opportunity to exit their house with dignity and to avoid foreclosure.  Lenders get the benefit of liquidating an upside down or non performing mortgage without the expense and wait of the foreclosure courts.  Everyobody should win.

On the Seller’s side:[2] 

We have closed dozens of short sales and saved our clients from foreclosure, deficiency judgement, and bankruptcy. Our short sale clients are able to dispense with their home with dignity, under their own terms, instead of eviction or repossession.

Being “underwater,” behind on your payments, and dealing with collectors and legal notices is among the most stressful things a person can endure.  The uncertainty of not knowing what will happen, the damage to your credit, and the fear of losing your home can be crippling.  When the economy declined in 2008 and 2009, legions of people found themselves in this position through no fault of their own.  They didn’t take out a risky, exotic mortgage.  They didn’t borrow irresponsibly.  They simply found themselves in a situation where they needed to sell but didn’t have the equity to cover their expenses or pay off their loan.  Areas of Westchester and the New York metropolitan area lost 20-30% of value from the peak (sometimes more) and people who never did a thing wrong were caught in the undertow.

That’s where we come in.  We are proud of our record in helping our short sale clients get out from under their mortgages and get started on the road to a fresh start. We have a team of attorneys on speed dial that have helped stop foreclosures and negotiated settlements with the lenders where our seller clients did not end up owing any money. We have accompanied our clients to settlement conferences at the courthouse in three counties and counting.  And if there is a way to help you too, we’ll find it.

 

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