What is a Short Sale?
A short sale is when the net proceeds from the sale of a home are not enough to cover the sellers mortgage. The bank accepts the net proceeds which is the money left after the sellers closing cost that have been paid. Those cost include: real estate taxes, deed, title fees, survey, and real estate commissions. Another cost that can be included in the short sale is the delinquent interest on the loan, late fees and attorney fees. If you are delinquent on your mortgage, these fees add up very quickly and raise the payoff of your mortgage.
Example:
Mortgage $120,000
Sales Price $100,000
Closing Cost $ 7,000
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Deficient Balance $ 27,000
The deficient balance is what the bank takes as a loss at the sale of the sellers home. So why does the bank willingly take $93,000 payoff for the $120,000 that is owed? Simply put, Banks Deal In Money NOT Real Estate. They do not want to foreclose on the homeowner. Foreclosure is expensive for the bank and quite frequently they will have to sell the home for less than what the home could have been sold for in a short sale.
Who is a Short Sale for?
There are lots of reasons to consider a short sale, but the most important thing to remember is that you MUST be able to prove a legitimate financial hardship in order to qualify. With that said, short sales are for people who no longer can afford their home.
Loss of employment and no longer able to keep up on your mortgage
Refinanced your home to pay off consumer debt and no longer can afford the higher payment
Bought at the top of the market and now your home is worth less than what you paid and you can not afford to bring money to closing
Have an adjustable rate that has adjusted and the payment is no longer affordable
You have fallen behind and can not catch up on your payments
There are many reasons you might consider a short sale. Everyone has their own unique situation and each situation needs to be carefully looked over. We have dealt with many families in many situations to help them determine if a short sale is their best option. We have the experience and knowledge to carefully examine your situation and explain your options. Maybe we can help you find a way to keep your home. If that is not an option, we can show you how a short sale works and what the pros and cons are.
In my next post, we will discus the pros and cons of a short sale. I will also explain the process of a short sale and what documentation will be required from the homeowner.
If you have any questions or comments, please feel free to post them here. You can also contact my by email or phone.
Joe & Kristyn Leksich
Joe Real Estate Inc.
Joe@JoeRealEstateFW.com
260-704-6253 cell