A SHORT SALE in real estate is the sale of a home/property where value is less than the balance owed on the loan and lien amounts.
The term Short Sale means that the lender/lienholder will come up short of the full amount required for loan payoff in the event of a sale. The lender/lienholder might agree to allow the homeowner to sell their home short, for a lesser amount than owed on the current loan.
A short sale is a long and time-consuming process, which starts with the homeowner hiring a Realtor (an agent) to list the home for sale on the local Multiple Listing Service. The homeowner and the Realtor (real estate agent) agree on a price for the listing, which is usually based on a comparative market analysis (comps) of recent sales in the neighborhood.
The lender/lienholder will not process a short sale until a valid offer has been made, and a contract for sale signed by both parties.
The homeowner must prepare and submit an extensive short sale package, with financial information, two years of income tax returns, hardship letter, and an authorization letter to the lender/lienholders holding their loan. Included with the submission to lender/lienholders would be copy of the sales contract, proof of funds for the buyer, and comparable sales information.
The lender/lienholder will determine whether the homeowner is eligible for a short sale and a price it is willing to accept.
The short sale process will probably take months. During that time, the lender/lienholders will request additional documents, signatures on contract addendums, and other documents that have already been submitted (which lenders sometmes lose). The lender/lienholders will determine whether the homeowner is eligible and if the lender will accept the offer submitted by the buyers.
The short sale listing Realtor agent should have experience and education in this process. Such listing agent will try and protect seller’s right by making sure that the debt is discharged by when the property is sold. The seller would otherwise be responsible for the unpaid portion of the debt. The short sale listing Realtor should have experience in the art of negotiating and dealing with loss mitigation departments at lenders/lienholders.
You as short sale buyer should consult with an attorney, or title insurance company. Sellers who apply for short sales can have debts and liens on the property, like unpaid utilities, homeowners assessments, mechanics liens against the property, and buyers need to make sure that you are getting clear title.
In many short sales, there is more than one debt as lien against the property. Some homeowners have a first mortgage when they buy, then take out a second loan later. Liens can include a first and any number of mortgages, including a Home Equity Line of Credit (HELOC).
When negotiating the short sale, all of the lenders/lienholders must agree to the sale, which is challenging for sellers and their Realtor agents. Some subordinate mortgage holders ask for more money and hold up the sale until satisfied.
Once the lender/lienholders complete their analysis of the sellers hardship and financial position, they can agree in writing and make the property eligible as a lender approved short sale.
As a buyer in short sale, you want to be in first position. If the lienholders like your offer and agree with seller short sale package application, they might also accept or ask for increase in offering price.
When lienholders give green light in writing to the seller’s package and a buyer’s offer, the short sale would then be lender approved.
Trying to buy a short sale in real estate will take lots of energy, time and patience.
Buyers in short sale must tour and inspect the property before concluding a purchase. Some situations at the property can be minor and others (like concrete in the plumbing) can be an ultimate deal breaker. Protect yourself and your investment by doing inspections.
When buying a short sale, you will need an experienced Realtor, real estate attorney, home inspector, insurance agent, title company, contractors, handymen, and possible property managers.
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Thanks for contacting us about SHORT SALES, homes and properties at Orange County, California, and we are here to help you.
Harrison K. Long - solutions for real estate and business - REALTOR, GRI, broker associate, Coldwell Banker Residential Brokerage - 949-854-7747 (phone) – ExploreProperties@gmail.com (email) - CA DRE 01410855 – SFR short sale and foreclosure resource certified by the National Association of Realtors.
Christi Anthony Long, REALTOR, Coldwell Banker Residential Brokerage – 949-212-5427 (phone)
This is for information only and not the providing of legal or tax services. You should consult with an experienced REALTOR and a real estate lawyer before making final decisions about short selling your property.
