Short Sale Information: What is A Short Sale??

Short Sales Command Higher Prices Than Foreclosed Homes

In December, foreclosed properties sold nationally for an average of 22% less than conventional sales, while the discount for short sales was only 14%, according to the National Association of Realtors (NAR). Banks are growing weary of the lengthy and costly foreclosure process. In an effort to cut their losses, banks are paying some struggling homeowners as much as $35,000 to sell their homes before they end up in foreclosure.

To cover the Short Sale details, here's a more official definition:

A homeowner is 'short' when the amount owed on his/her property is higher than current market value. A short sale occurs when a negotiation is entered into with the homeowner's mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then 'sold short' of the total value of the mortgage. For both the homeowner and the bank, a short sale - some situations - has become a much better proposition than letting the homeowner fall into foreclosure. Chase Mortgage, who has over 1,350,000 customers throughout Minnesota, says, "The first choice is a loan modification but if that's impossible than a short sale is a faster, more efficient solution". Read how home values are effected by U.S. credit conditions and effect short sales. Buyers seeking short sale information should read more about the Home Rehabilitation Loan Program.

Underwater Mortgages: A Short Sale May Be The Best Solution

A short sale may be the best solution for homeowners who are "underwater". This means they need to sell, and they owe more on their homes than they are worth. In the past, it was rare for a bank or lender to accept a short sale. Today, however, due to overwhelming market, finding that foreclosures can drag on for years, changes and new opportunities, banks and lenders have become much more negotiable when it comes to these transactions. Recent changes in corporate policy and the Obama administration have also improved the chances of getting a short sale approved." Loan modifications and short sales help stabilize home values and neighborhoods, and limit the losses incurred by lenders, the federal government and taxpayers, which is good for everyone." - NAR, January 12, 2012 on short sale information.

How A Short Sale Works

Different from a foreclosure, the bank does not own the property in a short sale transaction. Think of buying a short-sale property similar to a traditional purchase. However, there are a couple of ways in which the purchase agreement is different. The contract will specify that the terms are subject to the mortgage lender's approval. In a normal transaction, the only party who would need to approve the sale is the seller. You can expect:
The contract states the purchased "as-is"
The bank to lower the price to account for repairs if any problems are revealed
The seller, being strapped for cash, isn't likely to be able to help with repairs
Unlike a foreclosure, the home is less likely to be ransacked. Homeowners who lose their homes to foreclosure often vent their frustration on the house as a mistaken way of getting even with the bank
It may be a time-consuming and patience-testing process
The buyer should anticipate being asked to have enough money for closing costs

A Short Sale BPO

A Broker's Price Opinion or the BPO gives you a significant advantage when buying a short sale. BPO is simply a way for a seller to determine whether he will be selling the property for a price higher or lower than the current market price or property value. BPO is a process that you need to take in order to determine the fair market price of your house. As a seasoned real estate agent and CDPE, Jenna Thuening is familiar with the different factors that need to be taken into consideration when assessing the value of the home. it will be more accurate if you are going to take their considerations. This will ensure that you put your property on the market for the right asking price and reduces risks that you may be putting more dollars into it than you should, or exhausting your energies on an unrealistic asking price.

The BPO is the key piece of information that your lender may rely on to make their decision regarding your short sale. The lower the estimate, the better it is for you. Many say it is the single most influential component. An accurate BPO is important to close the deal. Understand that today approximately 70% of the short sale offers to banks are accepted. Meaning that 30% of the deals fall apart. Most often banks say "no" when the BPO is set too high and the bank feels the property is worth more than it actually is.

For example, if the first BPO were to be set at $295,000 and the second one comes in at $215,000. And say your home is realistically worth $450,000 with a $350,000 balance. An original offer may be $199,000. The bank could be firm at $300,000. With an $80,000 difference in the BPO’s, the bank may lower its number from $300,000 to $250,000 making the short sale deal work. The key may be the skill of a second and more accurate BPO.

Short Sales Are On The Increase

Usually the short sale option is better for the homeowner than a foreclosure. Read why short sales are on the increase.

This seems simple enough. However, a short sale is a complicated process that takes the expertise of experienced professionals. Home Destination can provide you with all the short sale information that you need, allowing you to rest assured that you will have a successful outcome when doing a short sale. Contact Jenna Thuening, a CDPE in your area. Together, we can identify all possible options and, when possible; I can assist you in the quick execution of a short sale transaction.