What is a Short Sale?
I had one client who kept referring to a short sale as a “quick sale.” Quick is one thing a short sale is not!
A short sale occurs when the owner of a home owes more to their mortgage company than the home is worth. We’ve seen this most recently happen due to loss of job combined with declining values. Owners who are in this position will need to contact the bank and provide documentation to prove they have a financial hardship that would qualify for a short sale. Many banks and mortgage companies will first try to work out a loan modification with the owner. If this is not possible, a short sale is the way to go.
A complete short sale transaction typically takes three to six months or longer depending on the bank. Some great values have been gotten far below market value, but patience is a necessity for all involved.
Why would a bank agree to take less than what is owed on a mortgage? Foreclosure is an expensive and time consuming process for banks. Every case is different, but a short sale is usually preferable for both lender(s) and home owner.
Is a short sale right for you? Here are a few things to consider:
- Are you willing to wait 4-6 months to close? If you need a home within a certain time period, then a short sale may not be the best choice.
- Can you handle the uncertainty and disappointment if the short sale is not approved? Make sure you are working with a good buyer’s agent who will protect your earnest money and minimize your out of pocket expenses.
- Most short sale properties are sold “as is”. It’s important to get a home inspection from a qualified home inspector so you won’t be hit with surprises after closing. If the home is in obvious disrepair, it may not meet the standards of your lender, especially if you are using an FHA loan.