LOOKING AT “SHORT-SALES”

What IS a “short-sale”?  Simply defined, this is a sale where the homeowners owe more on house than what it can be sold for.

What are the requirements for a Seller to successfully achieve a “short-sale”?

1)  The Seller has to furnish proof of financial hardship to the Lender(s). 

2)  The Lender(s) have to agree to accept a lesser amount of dollars from a sale than they are owed.

Issues with getting short-sales Lender-approved:

If a Seller has either the resources to allow a continuance of monthly payments, or resources that could be used to pay the gap in dollars that would exist between the sale price and what is owed, Lender(s) will not agree to a short-sale.

A number of “originating” Lenders are no longer in business.  Many loans have been sold off or transferred to servicing agencies, and often several times.  This creates problems in trying to clear Title to complete a sale.

Often there are outstanding fees and interest amounts from delayed or non-payments to the Lender(s).

Often there are HOA assessments, liens, and fees that are outstanding.

Often there are unpaid property taxes.

Lenders do not have enough staff to process information requests and potential sale contracts.

Issues with getting short-sales CLOSED:

It can take MONTHS to get one or more Lenders to respond to an offer.  There is no guarantee that the response will be an accepted contract.  If a higher offer comes in during this timeframe, it can replace an existing Buyer’s offer.

Buyers get discouraged and pull out.

There are no dollars for repairs, and NO REPAIRS CAN BE MADE-- Buyer takes property “as is”.  If Seller money existed to make repairs, those dollars would be required to go towards the outstanding “short” loan payoffs. 

If the “numbers” for a successful sale are actually worked out and Lender(s)-agreed to, there is a narrow time frame for those numbers to be good – a Buyer working on getting purchase financing frequently has the requirement from his end for a longer time-frame than the Seller’s Lenders.  This leads to the short-sale process that was agreed to having to be started over:  i.e., all the numbers re-figured, new lender-staff involvement as the old file is now dead; and probably a new Buyer…….  so the process repeats.

Buyers are often required to pay closing costs for the Seller, outstanding HOA fines & fees, outstanding taxes owed on the property, and additional fees to professional loan mediators handling the short-sale process for the Seller & Lender(s).

As of January, 2012, a little over 20% of closed sales were short sales. 

Short-sale purchases are appropriate for a Buyer who does NOT want a “home” but is an investor, and has both the reserve dollars and the patience to stay with a long offer-contract time frame until its completion.  Most successful short-sales are all cash transactions, and they average 6-10 months to complete.