Learn about short sale homes

Short Sale Information and Tips

Many people who never thought the ownership of their home would be questioned have been pressured by unregulated lending policies and a false market that was misunderstood by appraisers. The results from the recession have been disastrous. Short sales and foreclosures are everywhere. One in every seven homes in the United States is late with their payments and in violation of their security agreement.

This hard reality has been painfully obvious by the number of foreclosures and short sales taking place across the country and spanning all income levels. The inability to pay an existing mortgage is generally caused by unemployment or other financial hardship. People who never thought they would need to know are now wondering what is a short sale.

The process of a short sale applies to those homeowners who owe more on their property than the property is worth. According to the National Association of Realtors, more than one third of all real estate transactions are short sales. That is a bitter reality that has tremendous financial and emotional repercussions.

In a short sale, the seller needs the bank's cooperation to sell the home for its true value that could very well be below the amount of the mortgage loan. If the bank will not accept the terms of a short sale contract, the property will most likely be foreclosed. At that point, the house may be purchased at auction or moved to the bank's balance sheet as a Real Estate Owned (REO) property.

Because banks are uncomfortable owning residential property they are prone to accept a reasonable short sale. The seller must request cooperation with the lending institution. Some banks will cooperate with a distressed seller but others may hold firm and commence foreclosure.

It is the seller's responsibility to present compelling information about the dire circumstances and detail a short sale strategy that the bank will consider. The short sale is usually concluded with the help of real estate agents or brokers.

The property is listed and placed in multiple listing where it will be identified as a short sale. Experienced short sale real estate agents have greased the wheels and know how to bring about offers and sales and how to help the homeowner present the best case.

The biggest problems with short sales are the amount of time the lender will take to make a decision and the nature of the buyer who is usually an investor rather than a homeowner. The investor may acquire the property and rent it until the market recovers. At that point, the investor will try to sell the property.

The advantage to the seller in a short sale is that the credit worthiness of the defaulted buyer can usually be cleaned up in two years. The effect on the owners credit in a foreclosure can take three times as much time to adjust. Unfortunately, it now appears the housing market is in a double dip and many more homeowners will face a short sale or a foreclosure.