Most lenders will require to be considered for a short sale the borrower to show a type of hardship. Examples of a hardship loss of income, divorce, unemployment, medical illness, etc
Some lenders now will consider you for a short sale if you are not in default; if you can prove you can no longer pay the loan and will soon fall in default.
An REO (bank owned property) is property that has been foreclosed on by its lender. The title has been transferred to the foreclosing entity - the lender, which is normally a bank. Presently, banks foreclose on a property because either the homeowners can no longer maintain monthly mortgage payments or because the homeowners simply walked away from the property because it is now worth less than what is owed (i.e. borrower owes $500,000 on a property that is now only worth $300,000 in the market). Aside from equity loss, banks spend a substantial amount of money to foreclose on a property and maintain it until it is sold. Hence it is in the best interest of the bank to â€œunloadâ€ or sell the REO as quickly as possible to avoid further losses. In a down market, banks have to sell low. Therefore, REO pricing is very aggressive and are normally priced at the lower end of a price range. An REO can close within 15 to 30 days. The disadvantage of an REO is the property will have deferred maintenance issues and most would be in poor to fair condition, although most bank owned properties today are being rehabilitated by the banks to maintain the integrity of the neighborhood. There is Competition from other buyers for REOâ€™s and it can sometimes be fierce.
A Short Sale is property that has NOT been foreclosed by the bank or lender; and, the same conditions exist where the homeowner may be â€œupside downâ€ (what is owed is larger than what itâ€™s worth) on the property or the homeowner can no longer afford to make monthly payments). To avoid foreclosure, the homeowner can elect for a short sale. A short sale or â€œshort payâ€ happens when the bank or lender agrees to sell the property at an amount less than what is owed (debt is $500,000 but market value is now $300,000). The homeowner is forgiven the remaining debt (in California). In this case it is the bank that has final decision on the sale (with the concurrence of the homeowners). Banks allow short sale when it determines it can minimize losses without having to foreclose. Pricing can be at market or a little below. A short sale can take a minimum of 2 months to 12 months to close, if at all. However, more lenders are inclined to do a short sale today. Condition of short sale properties would be very much like REOâ€™s â€“ deferred maintenance issues and most would be in poor to fair condition. There is competition from other buyers especially if the property is in good condition or in a good school location; but, mostly not.
A regular sale is property that is being re-sold by its present homeowner. Because real estate markets are very much affected by REOâ€™s and Short Sales, regular sales have to compete with lower priced REOâ€™s and Short Sales. Regular Sale pricing is now more aggressive and competitive. However, pricing is still at the median or higher price range, due to homeowner pride. The advantage of a regular sale is it can close fast, the property is normally in good shape (REOâ€™s and Short Sales are sometimes vandalized or have deferred maintenance issues); and, there is less competition from other buyers.
For more advice on what is an REO, Short Sale and Regular Sale call (408) 316-0793 or email firstname.lastname@example.org
DRE # 01266541
First Pacific Real Estate
Cell: (408) 316-0793
Short Sale simply means selling your home for less than what you owe. In order for you to successfully complete the transaction, your lender has to agree to it. Check out our website for a short video regarding Short Sales, http://www.lorenzorealtors.com/ap.aspx?p=8887&page=Short
Intero Real Estate Services
As the others have pointed out, a short sale is the sale of a home, where the Fair Market Value of the home is not high enough to provide all of the proceeds to pay off all of the mortgages, other liens and the costs of the sale.
The actual process is actually very long and complex. The lender(s) must be persuaded to accept less than the amount that they are owed when the home is sold. This is often a rather long and complex process.
If all of the lenders cannot be persuaded to accept less than the amount that they are owed, the short sale fails and the house is foreclosed in most cases.
Charles Butterfield MBA
Real Estate Broker/REALTOR
Cell Phone: (408)509-6218
Email Address: email@example.com
1) The property is "underwater" meaning the homeowner owes more than the current market value of the home; such as he bought for $600K with a loan of $500K and now it's only worth $400K. When a new buyer offers to purchase the home, the lender(s) must agree to write off (forgive) the difference (as if $100K in the above scenario).
2) The homeowner can sell the home for the loan value(s) but is "short" the funds to cover the expenses of selling, such as commission, property taxes, transfer fees, etc. If the new offer only covers enough to pay off the loan balances, the seller must get the lenders to agree to pay for the costs of selling, so it is still "short" enough money to complete the sale.
I hope this helps you. Remember no question is stupid.
I hope this helps and if you have any questions feel free to contact me.
George Nowicki REALTORÂ®
Realty World Platinum
3333 Bowers Ave #130
Santa Clara. CA 95054
It is great that you wish to have more knowledge, so I don't seeing anyone hating you for that. In a nutshell, a short sale is when a lender agrees to accept a payoff that is less than the lien amount, combined with the costs associated with the sale.
The homeowner has some sort of distress, and the bank agrees to take a loss. This loss is less than the costs associated with the foreclosure process, so there is an incentive to work with the homeowner to short sell their home.
If you would like to speak further in regards to short sales, or have any other questions, please don't hesitate to get in touch with me.