What Is A Short Sale?

Short sales have been what real estate professionals call the “market of the moment” for about 5 years now. But what the heck does it mean? Basically, a short sale happens when a person sells their house for less than what is owed, otherwise known as “negative equity.” For example, the remaining loan on your house is $200,000 but it will only sell for $175,000. Ok, that sounds pretty simple, right? Not quite. The challenge you have now is that you must convince your bank to allow you to do this. In a perfect world, a short sale will allow you to sell your home for as much as the market will bear. The net proceeds, after all closing costs and commissions are paid, will then go to your lender as payment in full and they will forgive the difference.

So why on earth would a bank do this? That is the question we get most often when someone learns what a short sale is. The thing to keep in mind is the financial climate in which we now live. Many people are not able to avoid foreclosure and banks are getting into the business of owning real estate. Banks do NOT want to own real estate! The key point in this process is to show the bank that they are at risk of having to foreclose on the home. Our job is to convince them that in order to avoid foreclosure, they should allow you to short sell the home. Banks understand that if they end up owning the home through a foreclosure, they then have to turn around and sell it. They will only get the price you were attempting - or if a lot of time has passed, maybe even less!

As you can imagine, it is very important to have a strategy for short selling your home. Banks are going to do everything they can to recover as much of the loan as possible. So yes, there is a lot of work that is involved in the process. This shouldn’t scare you though. Like most things in real estate, it is a fairly simple process, just not that easy. As you will see in a later post, there are many forms and a lot of documentation that you must provide to the bank. This begins the process that for some can take 90 days, but I promise, getting the 'approval' from the bank makes it all worth it!

For any questions or to learn more about the process of selling your home, feel free to contact us or visit our website at any time. Have a great day!