What is a Short Sale?
A short sale means the seller's lender will accept a discounted payoff to release an existing mortgage. Just because a property is listed as a short sale with a specific asking price, it does not mean that the lender will accept this amount, even if the seller accepts it. Lenders sometimes would rather go through the short sale procedure to avoid keeping bad loans on the books. However, current homeowner will need a good reason for the lender to agree to a short sale – illness; unemployment or family matters may be considered and pointed out in the hardship letter. Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose. Also, the lender's decision to accept a short sale will depend on a variety of factors. Banks will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing as there are expenses associated with a foreclosure. A bank will typically determine the amount of equity (or lack of), by determining the probable selling price from a Broker Price Opinion (a.k.a. BPO) or by ordering an appraisal. Short Sale can be a good deal for a buyer, as long as you're aware of the extra time and work required to make it happen. All offers are made subject to mortgage holder’s approval. Most of the contracts by default say that the buyer is willing to wait up to 45 days for mortgage holder’s decision. But in many cases it could take up to 3 or even 6 months. Buyers that need to be in a house by a specific date (current lease is ending, home sale and etc.) should avoid short sales. Bank owned homes would be a good option. Bank owned homes are the ones that already been foreclosed and are owned directly by the bank. If you make an offer on a bank owned property, you can expect to get an answer in 2-3 business days. Many buyers choose to look for properties that already have been foreclosed and listed for sale by the bank. Click HERE to read more about Foreclosure process. Also you can search ALL Bank Owned Foreclosures and Foreclosed properties in Naples, Bonita Springs, Estero, Fort Myers and Marco Island.
For the home owner, advantages of a short sale include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed.
The Mortgage Lender's "Short Sale" Factors
The seller's mortgage lender will be considering many factors in deciding whether to approve a short sale, including:
- Whether the seller is deserving of a break, due to financial hardship caused by unforeseen circumstances such as layoffs, divorce or illness
- Whether it would be cheaper to simply repossess the house, make any necessary repairs and sell it through a real estate agent
- How many other properties the mortgage lender currently has in default