What are they and how do they impact me?
A lot of people I work with misunderstand what it means to
short-sale a property. Many think it
means that you can buy a property in a short amount of time. Truly nothing about a short sale takes a
short amount of time.
A short sale is when the owner of a property is attempting to sell the
property for less than the amount(s) owed on the property. That is the simplest definition of the
process.
Short sales have become much more “popular” over the last 3
– 4 years as the economy has changed and real estate prices declined. This option, initiated by the property owner,
is a much better solution to a bad situation for both the property owner and
the lien holder (bank), but it is not easy.
First, the property being sold must receive an offer from a
buyer. Basically nothing really starts
on obtaining approval from the lien holder until an offer is submitted. This is why an asking price on a short sale
property is not an assurance that the property can be purchased at that
price. Trained Realtors know how to
arrive at a price that can generate offers and have a good chance of bank
acceptance.
Second, the seller must qualify for the short sale. That’s right, the Seller must qualify. A property owner must have a qualifying
hardship for the bank to approve the property to be sold short of the mortgage
amount. Loss of job, reduced income,
divorce and job transfer is the more prevalent hardships, but there are a few
others. A property losing value is NOT a
hardship that qualifies for a short sale.
Third, All financial information is reviewed by the lien holder
and must be submitted by the seller. It
is a requirement that you enlist the services of a Realtor (hopefully a
certified one) to handle negotiations on your behalf. As a property seller you will have to submit
bank statements, tax returns, income statements, etc. to your real estate
agent. It is the responsibility of the
agent to compile and present the information to the lender, not judge it.
Forth, Approval by the lender will be based on many things,
but will always include the following three things; Seller’s financials,
current market where the property is located and strength of the buyer. The second item noted there, current market,
is often overlooked with inexperienced real estate agents when working with
sellers. It is important to submit offers
to the lien holder that closely represent what similar properties have SOLD for
in the sub-market where the property is located. Submitting an offer substantially below the
current market will only frustrate both the Buyer and seller and potentially
throw the seller into foreclosure once the offer is declined 2 – 4 months after
it is made.
Last, Patience is mandatory when pursuing a short sale. As I said in the beginning, nothing happens
fast with a short sale. If you have the
patience to wait, then it is a viable option for purchasing or selling a
property and is a much better option, for the seller, than foreclosure. It is also far better for the community than
foreclosure as pricing for a short sale generally falls between a
non-distressed sale and a foreclosure, so it keeps values up for the
neighborhood.
Compared to other areas of the country and even to other
sub-markets in the area, Barefoot has fared well with the volume of distress
properties. So far this year we are
tracking for a higher count of distressed sales in the resort than last
year. In 2011 there were 69 properties
that closed as either a short sale or foreclosure. Year to date for 2012 we have 47 properties
either closed or pending in distress.
There are still concerns that we will see an even higher rate of
distressed properties come to market this fall in this area. Looking ahead there is growing confidence in
the market stabilizing and fewer (non-distressed) properties coming on the
market. If the supply stays low and demand
consistent then even with a higher than normal distressed inventory the prices
will not be hurt too badly. If you are
not buying or selling real estate right now it is still important to stay
informed about the market and know your properties value.
Please accept this article as a brief summation of a very
complicated and arduous process. If you
would benefit from more information or need professional assistance please
reach out to a qualified Realtor certified in helping homeowners in hardship. You can reach me anytime at ben@benguyton.com or direct at (843) 241-1929.
