The 411 on Short Sales

Shorts Sales are quickly becoming the norm rather than the exception. Keep reading to find out the 411 on who is doing them and what homeowners can expect on both sides of the transaction.

1. When should a homeowner consider selling home as a short sale?
If your home is worth less than what you currently owe and you would prefer to sell, but don't want the adverse consequences of a foreclosure, a short sale is a viable alternative.

2. How is the high end market different for Short Sales, if at all?
The short sale process is not unique to lower priced homes, however, lately there have been an increasing number of high end homeowners electing to go ahead with a short sale as an alternative to struggling with their payments. In the past banks have been somewhat reluctant to approve high end homeowners for a short sale. Now, lenders are more willing to work with these homeowners that have other assets and aren't always mandating that those assets be depleted in order for their home to be sold at a loss to the bank.

3. What should homeowners expect as the Seller in the process?
They should expect lenders to request volumes of information about their financial situation, from personal financial statements, to monthly income and expense summaries. While daunting and lengthly, up to 3-6 months, the end result could be acheiving your long term goals without being weighed down by an upside down mortgage.

4. What are the effects for Buyers who want to purchase a short sale property?
The process for short sale buyers is similar to a tradtional sale, except that the lender has to approve the terms and conditions of the offer and subsequent sale. Be aware that this approval process is time consuming.

5. For Buyers what are some red flags and/or golden opportunities to look for?
You need to keep in mind the old adage, if it's too good to be true, it probably is. Look out for homes that are under priced, where you may be involved in a bidding war just to end up waiting months to learn that the home was priced way below what the bank will take as an acceptable loss. Be realistic in what you are going after. Homes with considerable upgrades or are difficult to appraise can be considered a great deal, since the brokers price opinion may not relect the value that is seen in the home.

Keep in mind that sellers need to know that a short sale may damage their credit, though probably not as much as a foreclosure. Also, lenders generally will only agree to a short sale if the seller is many payments behind and has received a default notice. Buyers may get a great property at a discount, but they also will need to go through some extra paperwork too. Not to mention, they also need to be prepared to roll up their sleeves if that new property needs fixing up.

Summary: In a short sale, a seller facing potential foreclosure strikes a deal with their lender to accept less than they owe on the property, in exchange for avoiding foreclosure.