Home Buying in Macedonia>Question Details

Joyce Koval, Other/Just Looking in Cuyahoga Falls, OH

How does a short sale work exactly? We saw a house for sale this way and are not sure what we're in for.

Asked by Joyce Koval, Cuyahoga Falls, OH Sat Nov 20, 2010

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Hi Joyce, A short sale simply means the property will sell for less than what is owed on it. In other words, the amount of money is "short" of what is needed to pay off the mortgage, taxes, liens, and selling expenses. The sale has to be okayed by the homeowners lender, because the lender will lose money on the process, often $40,000 and more. They can be difficult to close, especially if there is a 2nd mortgage or Home Equity Line of Credit. You should have a lot of patience and a good real estate agent representing you if you think that might be something to attempt. I can email a good two page explanation to you if you would like.

Jim Dvorovy, REALTOR
Cutler Real Estate
203 Applegrove NW
N. Canton, Oh 44720
Cell 330-685-4615
email: jdvorovy@CutlerHomes.com
0 votes Thank Flag Link Sat Nov 20, 2010
Everyone has given very true and very good information here. The one thing you must remember is it does TAKE TIME! Usually a minimum of 45 days - I had one that went nearly 100 days. There is no standard time frame. Some lenders (that is the sellers mortgage holder) have good systems and response times others dont.

They are getting better but it's a learning process. They were all swamped when the foreclosure crisis hit. Now they are getting better because they really DO NOT want to foreclose and take the house into inventory. They are realizing that they will get more of their money back if they sell it "short" than they will after months of waiting then marketing the home after the foreclosure.

One of the most important things you want to find out is WHY. Why is it going short sale. In order for that seller to be eligible is that it has to be a "hardship". it has to be for a good reason; Health, Death, Loss of Job or income, Divorce, etc. Some good reason. Not just because they decided to buy a bigger house or something like that. Ask why, what is the hardship reason.

Seller's have to provide a long list of financials, statements, letters, ect. If they are not willing to do the leg work then there is little the realtor can do. Find out too are the sellers cooperating and working closley with the Listing Realtor.

Good Luck...they do work. The seller and the Listing agent must work diligently to get it done. You can gert agreat house for a great price if you are willing to work at it and above all be patient.
1 vote Thank Flag Link Sat Nov 20, 2010
Joyce ~ In a short sale, the lein holder, Bank, is taking less than what is due. The question you need to find out is whether there is one lein holder or two or additional junior leins against the property. The time line is based on a lot of questions. I have had some transaction go as quickly as receiving an acceptance from the lein holder in under 30 days and others that have taken up to 90-130 days. Also, it is important to know whether the listing agent has handled short sales before or if this is their first.
0 votes Thank Flag Link Sun Jan 23, 2011

You should find my article "What Every Buyer Shouls Know Abour Short Sales" helpful:
0 votes Thank Flag Link Sat Nov 20, 2010
I can see some people are cutting and pasting their answers....nice long answer by somebody but 1/2 of it is about foreclosures, not short-sales. Can we please try to edit a little for time's sake?

And technically, a short-sale is not a pre-foreclosure. Not by my understanding anyway....

Joyce, if you don't have a buyer's agent go find one and do it soon...
0 votes Thank Flag Link Sat Nov 20, 2010
A short sale is a pre-foreclosure residential real estate transaction where the lender agrees to allow the homeowner to sell their property for less than or "short" of the outstanding amount owed on the loan and to release the property from the mortgage. The homeowner hires a realtor who is authorized by the homeowner to contact the lender to determine the lender's short sale requirements. Many lenders require that the homeowner enter into a contract for the sale of the home before requesting a short sale. The property is listed for sale and once a good price and good buyer is found for the property the offer is submitted to the lender for approval. The seller is required to submit a short sale package explaining their financial hardship along with supporting documentation as to why they are unable to make the mortgage payments. The homeowner may be required to obtain a short sale approval from not only the first trust deed holder but a second or third trust deed holder, a judgment lien or federal tax lien. Once a short sale package is submitted to the lender for approval, it may take many weeks to many months before a lender approves the short sale. A homeowner should carefully review the terms and conditions of the approval. The short sale approval may have an expiration date. Also, the lender may agree to release the real property as security for their loans, but not release the seller from personal liability for the underlying unpaid debt. It is extremely important for a homeowner selling his property through a short sale to consult with an attorney and accountant.

Once a homeowner stops making his mortgage payments, a lender may take anywhere from 2,3,4, or more months before they commence foreclosure proceedings. A lender is required to contact the homeowner by phone, in person or by mail to assess the homeowner's financial situation and explore options to avoid foreclosure. The lender must inform the borrower of the right to meet with the lender within 14 days and give the borrower a toll-free number for HUD-certified housing counselors. This requirement to contact borrowers behind in their payments only applies to certain owner-occupied residential loans made between 2003 and 2007. For most owner-occupied loans made between 2003 and 2007, a lender can file a Notice of Default 30 days after contacting the borrower to explore options to avoid foreclosure. The Notice of Default informs the borrower of the default. It must be filed in the county where the property is located and mailed within 10 business days to the borrower and others who have required notice. Three months after the notice of default, the lender may record a notice of trustee's sale setting forth the date, time and place of an upcomign trustee's sale. The notice of trustee's sale must be recorded, posted, mailed to the borrower and others, as well as published once a week for three consecutive weeks in a newspaper of general circulation. Up to five business days before the trustee's sale, the borrower may reinstate the loan by paying the missed payments plus allowable costs. After the reinstatement period expires, the homeowner still has the right to redeem the property by paying the entire debt, plus interest and costs (not just the arrearage) at any time before the bidding begins at the trustee's sale. California law allows a trustee's sale to take place 20 days after the posting of the notice of sale, but lenders usually wait 11 more days to help protect against any federal tax liens. At the trustee's sale, the property is sold at a public auction to the highest bidder and title is then transferred to the sucessful bidder by a trustee's deed.

(The information contained herein is believed to be accurate and is intended to provide general answers to general questions and is not intended as a substitute for individual legal advance. Readers with specific legal questions should seek the advice of an attorney.)
0 votes Thank Flag Link Sat Nov 20, 2010
Dee in Toledo put it all into detail. In short, I have worked with a lot of short sales as the listing agent and representing the buyer. And SHORT is not mean the amount of time. But, that the bank will accept an offer tht is less than what the outstanding balance of the mortgage is.

Patience is the key, if you have a good buyer's agent and they work with the listing agent it can happen!!!!!!!!!!!!!!!!!

Barbara Kachenko

Servicing Summit, Geauga,Portage counties in OHIO

0 votes Thank Flag Link Sat Nov 20, 2010
Statistics show that only 25% of short offers ever get to the closing table. If the listing agent is a certified distressed property expert, statistics show that 85% of those short offers get to the closing table. So teaming up with an agent who has taken the time and effort to educate themselves is imperative.

A short sale means that a homeowner owes more on his mortgage than what current market values will net him. Short sales are not usually a way to "get a good deal", as most banks are looking for an offer that is close to "market value." However, if a home is in poor shape (due to the homeowner not having moeny for needed repairs and the everyday necessities of home ownership) it may be a way of getting a home at a reduced price that will increase in value once repairs and updates are accomplished.

The #1 factor a buyer must acknowledge is a short sale transaction takes PATIENCE. If you're in an apartment and need be out by a certain day, then a short sale is not for you, unless you have a Plan B regarding living arrangements.

Be prepared to be frustrated ... and then frustrated some more. Paperwork is oftentimes lost by the bank (due to shared fax machines and attrition by burnt out loss mitigation department employees).

And don't be surprised to have your offer rejected, even if it's generous. There are many reasons that banks say "no", one of which is that it isn't necessarily their decision, but the decision of "investor groups" who have backed (or bought) the original loan.

If you don't have a definite timeline and don't mind being patient, you can find a great house, so don't give up. I encourage you to give short sales a chance, as they are a good way to help out a huge segment of the country's under water homeowners. You get a decent home for decent money ... and they get out of a mess without a foreclosure on their record and no deficiency judgments most of the time.

Good luck!
Dee Nofziger Realtor
Toledo, OH
Certified Distressed Property Expert (CDPE)
0 votes Thank Flag Link Sat Nov 20, 2010
There is a ton of information on short sales throughout the internet to help educate you on the process and any agent in todays real estate market probably has experience with short sales, so get an agent to help you and ask a lot of questions. Like any real estate transaction you can have a good experience buying a short sale or a bad one. But even with all the information behind you and the most experience agent in short sales representing you, there can be many unforeseen pit falls. If you are patience and have the wherewith-all to get through the process you can get a good deal on a home. It helps if you don't have too many expectations, can stomach disappointment and are extremely flexible as to when you need be in a home.
0 votes Thank Flag Link Sat Nov 20, 2010
A short sale is not short because of time it takes to close, it is called a short sale because the owners want to get out of their mortgage. If you need a home rapidly, a short sale is not for you. If you have the time to wait, then go with a short sale but only if you are well represented by a realtor who has done many short sales. Here are some of the pitfalls: (1) very time consuming and stressful. You never know if you will get the home. (2) Another department of the bank can pull the home for foreclosure while the listing agent is negotiating the short sale (3) sometimes you as the buyers are asked to contribute something to the seller's 2nd mortgage so that it can close (4) the bank won't budge on the price no matter what anyone shows them (5) the second won't budge on what they will take (6) many banks are totally non-responsive and lose all the papers once submitted. Then the listing agent has to resubmit them again - several months more to wait. (7) the bank can come back at any time in the negotiations and ask for more money. All things being equal if there is a home that is comparable and not a short sale, buy it instead even though it may cost a few thousand more. It is less stress and you will be able to close faster on the home.
0 votes Thank Flag Link Sat Nov 20, 2010
You're in for a roller coaster ride that could last for weeks or months! I'd hire a realtor in your area to help you through it . . . .
0 votes Thank Flag Link Sat Nov 20, 2010
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