June 22nd, 2014
In a short sale, a mortgage lender agrees to accept the sale of a house for less than the amount owed on the mortgage, if the owner of the home isn’t able to make payments and won’t be able to for the foreseeable future.
Short-selling homes can benefit all parties involved. The seller avoids foreclosure, the bank doesn’t end up with an unwanted property on its hands, and the buyer typically gets a good deal on a home. In January 2014, short sales cost an average of 13 percent less than market value, according to the National Association of Realtors.
The process of short selling a home is slightly different than the standard process for selling a property.
Step 1: Seller Contacts Lender
Before a home can be listed as a short sale, the seller and lender need to be on the same page. As the owner of the home, you’ll have to explain the situation to the lender and try to work out a solution. If the lender agrees to the short sale, you may be required to pay the mortgage balance left over after the sale of your home or the lender may forgive the balance.
Step 2: Seller Lists Home
The lender will work with the seller to set the price of the home and list it for sale with a real estate agency. Buyers can find the house through their real estate agents or multiple listing services. Interested buyers can contact the seller’s agent to see the home, just as they would for any standard sale.
Step 3: Buyer Makes an Offer
Interested buyers can then make an offer on your home. It’s recommended that buyers make offers that match the listing price or are very close to it, according to Freddie Mac. This is because the lender is already potentially losing money on the sale and is likely to reject low offers.
Most short sales are sold “as is,” so a lender will most likely not agree to repairs on the property. A prospective buyer is likely to put down earnest money to prove to the lender that he is serious about the offer to purchase and has the financial means to go through with the sale.
Step 4: Lender Reviews the Offer
This is where the process differs from typical real estate transactions. With a short sale, the lender, rather than the homeowner, reviews the offer from the buyer and can accept it, reject it or make a counteroffer. Depending on how many mortgages the seller has on the home, there might be more than one lender involved, which can slow down the approval process.
Step 5: Offer is Accepted or Rejected
If the lender approves the sale, the process from accepted offer to closing will proceed much like it would for any residential real estate transaction. If the offer is rejected, the process can start again with another prospective buyer or the lender may foreclose.
If you have any questions or need assistance with your short sale in the Orlando area, please call us at 407-384-8727.