Have I done a post on short sales yet? It is hard to keep up with all the weird mortgage news these day, but I don’t think I have. Most of my clients have heard of a “short sale” but do not know what it is. Admittedly, I did not even know what it was until last Fall.
A short sale is what happens when a homeowner needs to sell his home, but cannot afford to pay off his mortgage note and all the costs associated with selling property such as Realtor commissions, closing costs, title work, and any other liens or debt he may have on the home.
So what do you do if you are upside down and need to sell your home? Well, these days lenders are getting really friendly and agreeing to take less than the mortgage amount on the sale of a home, all in the hopes of avoiding foreclosure. The reasoning is that foreclosures end up costing the lenders alot of money in the long run. Plus, with foreclosures, they have to take ownership of the property and that is also something they hope to avoid. This is not a free pass for everybody though… If you have the cash and/or assets to cover the sale, the mortgage company will not help you. This is only for those people who are leading down the path to foreclosure. Once the seller gets an offer, they send it to their lender asking them to take a discounted payoff on their mortgage, and the lender really studies the seller’s financial situation and the offer before they will give their answer. They also aren’t in the business of giving homes away – so please, don’t call me looking for a “steal”. These are not a sure thing either, the lender does not have to say yes to the short sale. It’s a drawn-out and risky process. It can work out great, and you can get a great house at a great price, but it could just as easily not come together at all. The moral of the story is to prepare yourself for some emotional turmoil if you plan to engage in a Short Sale.