What Is A "Short Sale"?
In real estate, a short sale is a sale of a home or property in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. In a short sale, the bank or mortgage lender agrees to take a reduced amount on a loan balance, due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank's loss mitigation department. The home owner gets a contract on the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. The net amount, after commissions and excise tax, is usually less than the outstanding debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.
Extenuating circumstances influence whether or not lenders will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower's financial situation. If the homeseller of a property has the financial ability to bring cash to the table at closing for a mortgage debt short fall, this scenario would not be considered a short sale. If you are having trouble paying your mortgage and want to explore the option of a loan modification, check out the information form/questions at the bottom of this page.
A short sale is typically executed to prevent a home from going to the foreclosure auction, but the decision to proceed with a short sale is predicated on the most economic way for the bank to recover the amount owed on the property. Often a bank will allow a short sale if they believe it will result in a smaller financial loss than foreclosing, as there are carrying costs associated with a foreclosure. A lender will typically determine the amount of equity, or lack thereof, by determining the probable selling price from a real estate Broker Price Opinion (BPO) (also known as a Broker Opinion of Value - BOV) or through a home valuation by an appraiser.
In short, a short sale is nothing more than negotiating with the lender, a payoff for less than what they are owed. Because of the number of short sales banks are currently reviewing, the time it takes to get an answer from the lender has increased. The average short sale is now taking, on average, around 90 days to obtain as response from the lender. This timeline can sometimes be longer if there is more than one loan on the property.
Home Affordable Foreclosure Alternatives (HAFA) Program
Many homeowners may feel that they can no longer afford their home, but want to avoid the negative effects of foreclosure. The Home Affordable Foreclosure Alternatives (HAFA) Program offers homeowners, their mortgage servicers, and investors an incentive for completing a short sale or deed-in-lieu of foreclosure. With these options, under HAFA, a homeowner leaves their home to transition to more affordable housing and alleviate the mortgage debt they owe.
These options are available for homeowners who: 1. do not qualify for a trial mortgage modification under the Making Home Affordable Program; 2. do not successfully complete the trial period for their modification; 3. miss at least two consecutive payments during their modification period; or 4. request a short sale or deed-in-lieu of foreclosure.
How Do We Handle A Short Sale Real Estate Transaction
In Seattle and San Diego, The Cascade Team connects our clients with our short sale negotiator to work with you throughout the process. Because we are not attorney's or credit counselors, we have negotiated a special consultation rate with an attorney to provide information on the impacts of a short sale, credit implications, concerns regarding deficiencies, etc. In addition, our short sale specialist will work with you to ensure all the information required by the lender when evaluating a short sale is submitted to the lender with the purchase and sale contract. Because the selling price yields an amount less than what is owed to the creditor, all closing costs are absorbed by the creditor and there are no out of pocket costs to the seller. The Cascade Team Real Estate utilizes our same aggressive marketing strategies to obtain an offer as quickly as possible and turns that over to our short sale negotiating partner to begin the process with the lender.
Advantages For Our Clients
As a seller working with The Cascade Team on a short sale transaction, you will receive the following benefits:
- Special rate on a legal consultation and direct access to our in-house short sale specialist.
- You get the same aggressive marketing program to bring in an offer as quickly as possible.
- You have our short sale specialist following up on a regular basis with the lender and negotiating on your behalf.
- Bi-weekly updates on progress being made with the lender(s).
- You will have your real estate agent as a trusted resource to walk you through the process.
- We work will a professional licensed negotiator. This is very important, as many negotiators do not carry real estate licenses. The Washington State Department of Licensing is starting to come down on unlicensed negotiators. In addition, many negotiators pass their fees along to the buyers, which deters them from making an offer on your home. Our negotiator works with the lender to pay the fee and the buyer is never stuck having to pay to purchase your house. With our short sale negotiator's track record, this means that you, our client, get your home sold and closed quicker.
If you are in a situation where you need to sell your home, and you owe more than what it is worth, please contact one of our agents, or the main office at (800) 509-6905, for more information on how we might assist you through this process.