Short Sales 101
If you are a Seller who wants to List Your Property as a short sale, or if you are a Potential Buyer of a short sale listing, make certain you are fully informed before you proceed. It is not a simple enough topic to cover properly in this format. But here are some tips & guidelines that you should know.
1] Short Sales are a form of settling a debt with your current lienholder ; and will for certain negatively impact your credit report for 7 years.
2] Just because you are upside-down in your mortgage, does not guarantee that your lienholder will agree to a short sale. There are many factors that contribute to the Lender’s decision. If you have any other assets at all such as a second home, a SEP-IRA, etc. you will probably not qualify. It is essential that you prove hardship.
3] If you have more than one mortgage, and for sure if you have more than two lienholders, the likelihood that agreement will be obtained between all parties becomes very limited.
4] There are instances when a short sale is allowed, but the Lender can still hold you financially liable for the amount of forgiveness. It is also possible that tax consequences will occur.
1] If you have a specific time frame in mind, and need to have possession of the property within 90 days from the time you present your offer, do not count on a short sale purchase. It is unlikely that the Lienholder will even respond to your offer in under 60 days. Although there are exceptions, most responses require at least 90-120 days or even longer.
2] Although the Seller needs to first accept your offer & select it to submit to the lienholder, all decisions rest with the Lienholder. That also extends to other matters such as Requests for Repair and costs for termite work, etc. Regardless of what other items the Seller may have agreed to in your Accepted Purchase Offer, if there are any financial implications, the lender may or may not go along.
3]After your offer has been accepted by the Seller, it is submitted to the Lienholder for approval. Because of the extended time frame for the response, it is entirely possible for other offers to be submitted that maybe more favorable than yours. Because the Seller is not the final authority on Acceptance, just because your offer was submitted first, does not mean yours will be the one the Lienholder approves.
4] Do not have any unrealistic pricing expectations. The lienholders will perform their own due diligence, and determine market value for themselves. If the offers they receive during the short sale listing do not match their opinion of market value, they may foreclose on the property instead, and sell it on their own at a later date.
A] approved the Homeowner as a candidate for a Short Sale, or
B] approved the List Price as an amount they will accept.
Get expert help, have a lot of patience, and you may be rewarded!