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Short Sale

Joshua Jarvis…, Agent in Atlanta, GA
Written by Joshua Jarvis - Geor..., Agent in Atlanta
February 17, 2009 5:53 PM Foreclosure in Atlanta
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Short Sales is the buzz word of 2009, but what is a short sale really?

Short Sale is simply when the bank agrees to accept less payment then what they are owed by the borrower.

Example:  John owes $250,000 on his 4 bedroom home.  The comparables suggest that he cannot sell it for more than $225,000.  The bank agrees to accept $225,000.

There are some things that come into play, particular the hardship of the owner.  So that begs the next question:  What is a Hardship?

A hardship would be anything that has caused the borrower not to be able to make the payments.

This could be anything from divorce or job loss to the rate adjusting.  It could also be that the borrower moved up into a larger home (or downsized) but never sold their old home.  Each case is dfferent. Here is a list of the top 10 Hardships.

The next question that comes up is Why would you short sale?  Why not try to do a Loan Modification or just let the bank have it back?

The "SHORT" answer is that Shorting a home affects the overall credit of a borrower less than foreclosure both in length of term (2 yrs vs 5yrs) and overall magnitude (although industry experts have differring opinions on how much).

Lastly, there are all sorts of information that is being given out about Short Sales.  Check the people out.  How many have they really closed?  Fannie Mae has some tips about the scams.

The key is, NEVER PAY ANYONE UPFRONT UNLESS YOU KNOW THE PERSON.

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Comments

By Barbara R. Griffin,  Thu Mar 19 2009, 14:41
great article.
By Gabe Sanders,  Thu Mar 19 2009, 15:24
Also, be careful when buying a short sale that you use an agent knowledgable in the proceedures and issues involved. These transactions can be fairly straight forward or a nightmare depending on the bank and agents involved.
By Becky Cope-English,  Thu Mar 19 2009, 17:10
The only additional comment I will make is to make sure that when you sell "short" to make sure that the deed reflects that you've paid in full. This is critical.
By Joshua Jarvis - Georgia Realtor,  Thu Mar 19 2009, 17:16
Great reminder Becky! It's important to get "forgiven." Although, as of Jan 09, California may have to worry about 1099s!
By Larry G Potter,  Thu Mar 19 2009, 17:36
Excellent piece of advice and we take that approach. Hopefully, we can find some good
agents to bring us some short sales, we do all the work and they get paid a full 6%
commission.

Larry Potter, Pres.
KIM-LAR INC.

http://tinyurl.com/PALMSagent
By Barbara Capobianco,  Thu Mar 19 2009, 18:48
Shyort Sales can be a benefit for all. A Buyer buys a home with equity, a Seller doesn't Hve a forclosure on credit. 2 years are better than 7. You must use an agent that is knowledgeable and dedicated. I personally treat my clients as family! I can provide testimonials to this! When a bank forcloses they spend $49,000. Sometimes you have to be aggressive and step on a few toes to get this to be successful!
By Bruce & Sandy Soli,  Thu Mar 19 2009, 21:10
Short Sales is huge and having just earned my CDPE-Certified Distressed Property Expert Designation there is alot that goes along with it. You really must be VERY knowledgeable about the process in order to help your client and not hurt them. If you do not have any background do yourself a favor and take a class or two. If you are really planning on getting in to selling them I highly recommend the CDPE course! Expensive, but worth every penny.
By Monica McNamara, REALTOR,  Fri Mar 20 2009, 08:34
I wrote about short sales and some important issues to consider. Be informed and ask lots of questions. Most critical, have a lot of patience.

Check it out.

http://www.trulia.com/blog/monica_mcnamara_realtor/2009/02/understanding_short_sale
By James Williams,  Fri Mar 20 2009, 09:18
Excellent article on short sales and all of the comments were helpful. The home seller must understand that they can't get any cash from the sale since they are getting their debt discounted and avoideing foreclosure. For those who want to buy short sales you have to follow the process laid out by the seller's lender. Cross every "T" and dot every "I" and the most important thing you need is CASH. If CASH is what you need, I recommend going to http://www.preforeclosurefunding.com. Thanks again for the great content.
By MK,  Fri Mar 20 2009, 09:50
How do you get a short sale to be accepted when there are two banks involved and the bank with the lesser loan is being very difficult about accepting a payoff due to them feeling they can "squeeze more out of the homeowner" or have an entitlement issue above and beyond the assessed value due to the decline in the housing market? Two years ago our home appraised for $550,000--today $350,000! There are banks out there that have a bully attitude making this a personal vendetta with a vengence mentality, and do not accept this as an unfortuante business loss. We have lost short sale oportunities because of this banking paradigm. Any suggestions on how to get around this? Thanks for all your advice!
By Sharon Alters,  Fri Mar 20 2009, 15:15
Your agent or yourself need to get in touch with who owns the note - usually Freddie or Fannie - and ask them to put pressure on the banks. The bank with the second will get nothing if the house is foreclosed. It is important to have someone representing you who knows what they are doing. You may also want to have an attorney contact the banks.
By Joshua Jarvis - Georgia Realtor,  Fri Mar 20 2009, 17:27
Great spam from loan mod people. Fantastic

MK - I would suggest you play hardball back (or your agent). They will get NOTHING when it goes to foreclosure. You can tell them that you will just file bankruptcy to extend date in the home (depending on your state) then let the second loan get nothing.

Usually they will work with you. Suntrust is known to want more than the 25% of their debt - which can cause issues - but most other banks just play hardball, because they know YOU don't know what to do!
By Erika Eaton,  Fri Mar 20 2009, 19:43
What happens if there are two notes and the value of the home is worth less than the first note. Is there any incentive for the second note holder to agree to a short sale?
By Joshua Jarvis - Georgia Realtor,  Sat Mar 21 2009, 04:17
Erika - absolutely! The 2nd holder and the 1st both must agree to less than what they are owed. The 2nd will usually agree to $1,000 up to 25% of their debt. The key is that the 2nd lien holder will get nothing if it goes to foreclosure. That's the leverage you use to negotiate with them.
By Melanie,  Sat Mar 21 2009, 11:01
I would love to thank you all...you've answered quite a few questions of mine. I've been looking for a home for the last two months...I noticed the homes that i like and can afford are mainly short sales. The realtors that I've dealt with tried to discourage me from buying short sales. One told me the process is anything but short and proceeded to show me higher priced homes even though I am prepproved for much less. Needless to say I dropped him like a bad habit.
By Joshua Jarvis - Georgia Realtor,  Sat Mar 21 2009, 13:57
Melanie - That's horrible! A short sale is a tedious process but can result in great deals. It's not always perfect, clean or anything good but if you have time on your side, then short sales are great for everyone involved.
By Phil,  Fri Apr 3 2009, 18:41
I always like to ask the agent "who is working directly with the bank?" Some agents use an attorney, a 3rd party short sale / loss mitigation company, and others do the short sale themselves. I also find out if any offers have been submitted to the bank and the result of those offers. Ive had some agents tell me an 'attorney' is 'working on the short sale', and at the same time tell me they have not received an offer yet. To me there's nothing to work on without an offer. Other times I've been told they will submit all the offers as if the bank was the seller. Another short sale to stay away from. If your going to wait on a short sale, make sure the agent knows the ropes.

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