Pensacola's Real Estate Blog: How to survive a short Sale

Skip what is a short sale? It is a process where a lender agrees to take less money for a mortgage than is actually owed. In other words, let's say a homeowner owes $100,000 on their home, and for some legitimate reason, (job loss, health or under employment) they are unable to make their house payment. On top of that, because of the reduction in home values over the past few years, the home on the open market is only worth $85,000. The bank will sometimes agree to take less than is owed by the current homeowner to keep from having to go through the foreclosure process. Let's see if this video makes it more clear.

"Ok, so I understand what a short sale is, but what does that mean to me?"

Let's start with our sellers out there who are unable to make their payments, or are maybe very close to that point. Well, if you are the homeowner who is faced with inability to pay your mortgage, then keep in mind...there is hope.  You just need to get some good advice and move forward, so as to avoid a foreclosure.  Don't wait. Time is not on your side. You need to sit down with an agent, or a real estate attorney, so you can make the best desision.

"Well, Skip, I am not having a problem making my mortgage, and I owe less than my home is worth, so this doesn't affect me, right?" Wrong! If a home in your neighborhood is sold as a short sale or a foreclosure, your value WILL be affected. This means less money in your pocket when you decide to sell. If you don't plan on selling, and you purchased your home more than five years ago, then I have to agree--you are only losing money on paper, and hey, your tax bill will just look better.

"Hey wait, Skip, I am a buyer on the market, and I have noticed there are a lot of short sales on the market. They seem to be priced really good." Just keep in mind that a large percentage of these homes have not been approved by the lender. Let's insert an example here to clear this up a bit. Let's go back to our example, the seller has a home that they owe $100,000 and it will only appraise for $85,000. Now let's just say our sellers have put this home on the market and they are asking $86,500 for it, and you go look at it and fall in love...it is the best home you have seen in your price range, so you make an offer for $85,000. The sellers sign the offer, and the sellers' agent sends it off to the bank for their approval. Much to your disapointment, a few weeks later the bank has countered your offer at $89,300. "Skip....What?...they were only asking $86,500 to begin with!" Ahh, yes...the SELLERS were only asking the $86,500, but they had not yet received the approval from their lender, so the lender is now in the driver's seat and they have countered your offer. "Wait, Skip, you said the home would only appraise for $85,000." Yes, and you can still counter the offer the bank sent to you and include a Current Market Analsis, or CMA, along with your offer to get them to reconsider your offer. This will sometimes work as long as you don't need to get into a home in the next 30 or 45 days.  The process will usually take a couple of months from start to finish, then add on the usual 30 or so days to close. Also, keep in mind there are some short sales that are much longer.   You can stipulate in your purchase contract you are only going to give the lender a specific time frame to close, and if it goes any longer you will be released from you obligation to purchase.  Let's insert a video to illistrate my point.

"So, should or shouldn't I buy a short sale home?" The answer is yes...no...well, maybe! Talk to a Realtor, and they can give you the best advice that will fit your unique situation.

Grace & Peace....