Short Sales

A short sale is when a homeowner's lender agrees to accept less than what is owed, in lieu of going through foreclosure, and will release the lien they have on the property. 

For buyers, though short sales can take a lot of time and patience, the payoff can be well worth it if you aren't under any time constraints with your purchase. What typically happens is that after a sales contract is signed, a copy of that signed contract gets forwarded to the seller's lender for approval. They will also ask that all parties sign an affidavit stating that the purchase/sale is an arms-length transaction. That means that the parties are not related in any way, nor have any other relationship that would otherwise invalidate the short sale. In other words, there can be no prior arrangement or agreement to purchase the property in order for the seller to "get away" with paying less than what is owed to the lender. And as I mentioned above, the short sale process can be lengthy - sometimes taking months to complete. And in some situations, after a long wait, it is possible for the short sale to fall through. But if successful, the outcome is the opportunity to purchase a home for significantly less than what the home is valued at.

For sellers, you will be able to sell your home without the need to bring money to closing just to sell it. Your lender will require that absolutely no funds are given to you as a result of the sale - every extra penny must go to them. But the drawback to a short sale is that it will take a hit on your credit. From what I understand, it may stay on your credit report for up to seven years. I have closed a few sales where sellers ended up bringing a very significant amount of money to closing, in order to avoid those consequences. But there are a few requirements that you must meet in order to qualify for a short sale approval - just know that the lender will do their due diligence to ensure that you are actually in a position to need a short sale. Every lender has their own specific requirements, but for starters, they will ask for copies of financial documents to verify your inability to pay what is owed to them. 

But all-in-all, a short sale can be a winning solution for everyone involved. It might not be the right solution for a seller or buyer, but if the pieces fit, then a seller has the chance to unload a debt they can no longer afford, and a buyer has the chance to purchase a fabulous home for a fraction of the value. 

Please feel free to message me if you have questions about short sales, and as always, if you have any questions about closings in general. Have a great weekend everyone!