Let’s break it down. Say you’re selling your home; however, the offer you get is so low, it won’t cover the total amount you owe on your mortgage. But you need to unload it, so you’ll take it. This is a short sale—simply put, you end up “short” on paying back your lender, and the bank agrees to accept less than what’s owed on the loan.
Whether you’re looking to make a short sale or do some short sale buying, you’re in good company.
While selling a home under such circumstances is hardly ideal, many experts argue it’s smarter than pursuing more drastic measures like bankruptcy or foreclosure. Here are a few of the benefits of a short sale for a distressed home seller:
Short sales start off just like any other home sale: You contact a Realtor® (ideally one who specializes in short sales), list your home (mentioning that it’s a “short sale/subject to lender”), then wait for an offer to come in. But once you accept, things get tricky. You’ll need to get your bank’s blessing—and since lenders lose money with short sales, they’re rarely eager to hop on board.
“Some banks may even prefer to foreclose, since they not only assume ownership of the property but may receive bailout money from the homeowner’s mortgage insurance policy,” says Marlene Waterhouse, a Realtor and the owner of Short Sale Solutions. On the other hand, a short sale may appeal to a bank, since owning and selling property are hassles it may prefer to avoid.
To assess whether to approve your short sale, banks will require you to submit some paperwork, including your offer letter as well as a “hardship letter” explaining why you can no longer make your mortgage payments, along with financial documents such as income statements or medical bills to back that up. At that point, they will most likely have your home appraised to determine if the offer you’ve received is fair. If it is, they may allow the deal to go through, although they may have some stipulations (more on that next).
Short sales can be bargains for home buyers, but prepare to jump through a whole lot more short sale buying hoops than you’d find in a typical sale.
“I wouldn’t recommend them for first-time buyers, who may get frustrated with the extra paperwork and long waits,” says Waterhouse. “A traditional sale takes 30 to 45 days to close after the offer is accepted. A short sale typically takes 90 to 120 days, or even longer.”
The reason for these holdups is that the lenders—which are stuck paying for closing costs that a seller would typically cover—will often counter with their own demands in an effort to raise their bottom line. So, short sale buyers might hear, “We’ll accept your offer, but you’re responsible for all repairs, wire transfers, and notary fees.” Go ahead and negotiate, or walk away if you aren’t satisfied with the terms of the deal; ultimately it’s up to you to decide whether it’s worth it to absorb these extra costs. When in doubt, ask your Realtor to help you crunch the short sale buying numbers.
Bottom line? If you’re wondering what is a short sale going to do for my chances of getting out from under this mortgage, they can be a viable solution for some. Done right, sellers, buyers, and the bank can all walk away happy.
‘He explained everything very carefully and clearly, it was a great sales experience.’
‘I used my own loan officer at first, he started to jerk us around. Brad said that he knew of a few to contact. We used one that he recommended and in ten days, we closed on the purchase of our home!’
-Dan and Sandi H.
‘I was very satisfied with Brad’s service!’
‘Brad kept his promises, understood my needs, and was knowledgeable and easy to reach. He went out of his way to help me.’
‘Brad worked very hard to get the sale of my home finalized.’
-Pat & Jon D.
‘I would highly recommend Brad Brinkman to anyone in need of a realtor. I had such a great experience with him as my agent.’
‘I wanted to take the time to say thank you for your help in short selling my home and all the information you have provided me in this process.’
‘I would not hesitate to recommend Brad to anyone looking for a knowledgeable, ethical and kind-hearted real estate agent. In fact, I plan to employ his services on my next move.’
‘He is a strong negotiator with significant experience in the San Diego area. Having worked with many Realtors, Brad is the best I have seen.’
‘Brad is a consummate professional and we will definitely work with him again in the future’
-Greg and Marisa F.
‘Brad went above and beyond to make my home purchase as easy and seamless as possible.’
‘Brad was able to make the transaction very painless for both my wife and I. We greatly appreciate all the work that Brad put into selling the unit and we would definitely use his services in the future.’
‘It has been a pleasure working with Brad Brinkman as a real estate agent. Brad has helped us with the purchase of one property, and we are continuing our search for other investment opportunities with his assistance, which speaks to our positive experience with him.’
-Melvin & Lina F.