The Truth About Short Sales

Short sales are a key component when speaking about the current real estate market these days, along with foreclosures. Short sales though are a relatively new animal for the real estate world. What exactly is a short sale? Put simply it is the process by which a seller is able to sell their home short of the amount of money they owe on it.

For example we have a house who’s market value (the amount a buyer will pay for the house) is $120,000 and a mortgage of $150,000. The seller is under water on their mortgage but still needs to sell. There is a process a seller can do to get the bank to reduce the amount owed so they can sell their home. It takes contacting the bank and jumping through all the hoops they will require including a full application and BPO (broker price opinion, where a Realtor is hired by the bank to determine the market value of the property) and can take months to get done or can be completed quickly.

Short sales are better for your credit than a foreclosure. People who loan money like to see that a seller has done everything they can to live up to the agreement they signed. It means there is a much greater chance they will fulfill the contract next time. Some experts say a short sale will only affect your credit for a couple of years versus a foreclosure staying on your credit 7 years or more.

Although frequently given a bad rap by real estate agents for their frequent failed closings (short sales are a challenge to close), short sales are a great opportunity for people to get out from under a mortgage they can not pay for. In some states banks can come after sellers for the difference in price and what is owed on the mortgage. Most banks do not though.

A really good book to check out is "Survive & Thrive In A Recession" by Herb Strather. It covers many different ways to negotiate with the banks to facilitate a short sale. This developer author and teacher have put together an excellent accumulation of tips and tricks from his many years in real estate. It is the secrets of the pros revealed kind of book and well worth the investment. You can find more info on Strather at his website www.stratheracademy.com.

Sellers can complete a short sale on their own it is very difficult and takes a large amount of time on the phone. You must call the bank a minimum of three times a week to check on the status of the short sale. If you are at the point of missing payments and fail to do this they can schedule a date to sell the property on the courthouse steps. By keeping in constant contact you are putting yourself at the top of the pile of paperwork that litters most bankers’ desks right now.

The best thing you can do is get some help from a qualified short sale specialist Realtor that will help walk you through the process. Remember you are NOT required to pay them that is the Bank’s responsibility. Make very sure they are experienced in closing short sales not just listing them. Many unscrupulous agents use unsuspecting short sale sellers to attract buyers and have no intention of actually getting the home sold. Ask for references and check them. Also it is a good idea to ask for a past client’s phone number so you can call and ask them how well this agent did. Closing a short sale is very doable and will leave your finances much better off it is also challenging and having the person in your corner will greatly help your success.