1. Current owner still owes 500k on the debt (mortgage).
2. Market value of the home is 250k.
3. Current owner has to sale but they have decided not to cover their promise to pay the note.
4. The Lender has to take the hit, which in turn the American tax payers take the hit.
The difference between the amount owed on the original note and the amount the lender has to take the hit on due to the owner not for filling their promise to pay, is a short sale.
Hope this helps.
Best of Luck,
The trouble with short sales is that the vast majority of Sellers don't qualify for them and don't bother to find this out before listing their home this way. This problem is compounded by the lenders who typically refuse to evaluate the Seller (if requested) until an offer is on the table. So a buyer ends up getting what is essentially a worthless contract to purchase a property signed by the Sellers with the caveat that the sale must be approved by their lender. Now it's time to LET THE WAITING BEGIN.
Typically buyers need to be prepared to wait between 3-6 months to get a response. Statistically the response in more likely to be no than yes, and the reason is that the Sellers don't qualify. The primary reason Sellers aren't approved is because they do have assets and can afford to pay their lender what they owe though there are other reasons as well. The second most common reason is there are multiple lien holders on the property and one or more of them doesn't agree and that's all it takes to negate the sale.
Personally I don't waste my time on short sales unless their indicated as being preapproved by the Lender. (This may account for 1% of short sales in my part of the country) Often these properties end up in Foreclosure.
Janet Nation, CBR
Sailing Home Realty
Licensed Real Estate Salesperson
There are many Short Sales that never get to closing. The listing agent really needs to know what they are doing. They must know if the Seller meets the Lender's Short Sale candidate criteria. They must have the proper knowledge to help the seller compile a complete Short Sale package. Finally they must have knowledge of the local real estate market and the ability to overcome a dispute with the with the bank's negotiator over fair market value.
A Buyer may put in a low offer, the Seller may accept it, and everyone may celebrate the home is now under contract! Yeah, the Buyer thinks they got a steal of a deal, the Seller thinks the mortgage burden may finally be off their backs and the agent is planning a trip to the Bahamas with the commission they will make.
Then they wait. And they wait some more. The Lender asks the Seller for more documentation. We all know what happens next.... they wait some more. Meanwhile, the Buyer gets the home inspected by a professional Home Inspector. The inspector finds that since the seller has vacated the home over a year ago, the A/C is bad, there are plumbing issues and the roof needs to be replaced. Not a problem says the Buyer, we got this steal of a deal price on the home, we can definitely put the money in for repairs.
Months go by, and the Lender finally comes back denying to except the low price and counters much higher.
The buyer's steal of a deal is no longer such a deal and they walk away from the transaction. Now everyone is unhappy. The Seller still has the burden, the agent is not going to the Bahamas and the buyers have no where to live.
Months were wasted during that Short Sale fiasco. The Buyers could have instead, used that time to build a brand new home, select all the beautiful options they love with the colors that make smile. Within a few short months the new is built, the Buyers are thrilled with their new home with a warranty and the agent gets to go to the Caribbean after all. Everyone is happy!
This is why buying a new home over a short sale makes sense.
Thinking of new homes in St. Augustine? Visit a Landon Home community today. Building in Kings Trace, Oakbrook and custom homes on your lot.
Meir Aloni & Team
CRS (Certified Residential Specialist)
CDPE (Certified Distressed Property Expert)
RECS (Real Estate Cyberspace Society)
Successfully selling Broward County since 1986!
Direct phone# 954-338-5220 http://www.WeSellBroward.com
All Star Realty Inc.
http://www.trulia.com/blog/antonio_vega-pacheco/2009/12/fore Was this answer helpful? If so please click on the "green thumbs up" or the "best answer".
La Rosa Realty
for the seller is means:
1. walking away from their contractual obligation and promise to repay the loan
2. stop making their mortgage payments and racking up late mortgage payment
3. hiding money from the lender by moving current savings and extra money on hand each month due to not making their house payment to a family memberâ€™s account or saving it is cash in effort to look like they can't afford the mortgage
4. then after the short sale is completed, they suddenly have a 10% down payment saved to buy another home and complain because they find nobody will give them a loan for 3 yrs regardless of a700 credit score
for the bank it means:
1. having a borrower try to, in effect, extort money from them by threatening to go into foreclosure
2. letting the borrower believe they will be able to short sale, so even though they stopped making their payments, they stay in the home, keeping it up, while the bank drags out the process for 12 mo by repeatedly re-qualifying the sellers for the short sale and requiring BPO after BPO
3. having the borrowerâ€™s attorney, in effort to make money, advise the borrowers to file BK and include the house. Then the bank letâ€™s the house sit and does not actually transfer title for sometimes years after the borrowerâ€™s BK discharge date. This then becomes as a major surprise to the borrowers three years later when they go to buy a home and find they canâ€™t because the title had not actually transferred and their 3 yr waiting period has not started yet.
If the lender approves your case, you would have the unpaid portion of your debt forgiven. For this act of generosity to bailout homeowners, banks have received hundreds of billions in tax dollars from your fellow taxpayers (neighbors) and future generations.