Home Buying in Tampa>Question Details

Sarah, Home Buyer in Orlando, FL

Isn't a short sale a short sale for the purpose of the bank accepting less than owed?

Asked by Sarah, Orlando, FL Thu Feb 5, 2009

I'm hoping someone can help clarify for me why I'm seeing so many "short sales" on houses purchased 10 years ago or less, listed at $100,00, give or take, above what they originally bought it for?

Why do some listings say "may be a short sale", and not an absolute "this is a short sale?"

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Sarah~

Yes, It could dtill be a short-sale. Many people that bought 10 years ago, refinanced or obtained second mortgages, HELOC's and otherwised encumbered the property so that now- the debt is higher than the market value.

Many sellers are just grabbing at straws- hoping that the lender will accept an offer for less than what is owed.
1 vote Thank Flag Link Thu Feb 5, 2009
Sara,

This is a great question. I have buyers ask me this all the time. The majority of the inventory these days is comprised of short sales and foreclosures. Many of the properties advertised as short sales, however, have not yet been approved by the bank. The real estate agent knows that the house is not going to sell for what the current homeowner owes the bank, but the bank may not have necessarily approved such a sale. The real estate agent must attempt to sell the property for what is owed to the bank first and foremost, but if there is no interest or acitivity on the property the price must continuously be reduced until the price is right and an offer for purchase is submitted by a potential buyer. When there is a fully executed contract, it is submitted to the bank and the "short sale" approval process begins. This will likely take months, however, so I do not recommend this kind of purchase for anyone who wants a clear closing date or is in a hurry.
1 vote Thank Flag Link Thu Feb 5, 2009
Sarah,

A short sale means that the sales price may be less than the total amount of the encumbrances on the property. Sometimes the listing price will just cover the total payoff cost of the sale. Most cases it will not. The seller is coming to closing with nothing and leaving with nothing, except for a potential forgiveness of their promissory note. The 3rd party lender leaves the closing with a payment that is less than the amount owed on the property, which is less than the sales price, because it has to pay all of the taxes, title fees, commissions, liens, etc. out of the proceeds. You need to take into account that a lot of people during the rapid appreciation in property values, either refinanced or took equity loans out, some up to 100% of the value. With the drop in housing prices, they now owe more than the sales price. Hope this answers your question.

Bill Szydlowski
Future Home Realty
813-323-4443
Web Reference: http://www.tampamyhome.com
1 vote Thank Flag Link Thu Feb 5, 2009
There are a lot of factors that go into a closing and to closing costs. Depending on the time of year taxes may be more or less, if there are any additional liens that may appear due to other financial issues, or if the Buyer requests seller concessions. We do an estimate of closing costs that if it comes very close to what people owe on their mortgage - anything can push into a short sale status such as an offer that is lower that listed. The main thing is that until there is an offer many agents are only somewhat sure of the monies they are dealing with.

In regards to the purchase price being lower - with the historical lows for interest rate many homeowners refinanced. Then you add the historical value increases that too made many refinance. So it is the current mortgage that you need to look at when and how much to determine what their pay-off is. If you search public record - you can findout what they owe and if and how much they will be short. If you would like instrucitons on how to do this in your county in Florida I would be happy to send instructions. Just get in touch with me. Thanks.
1 vote Thank Flag Link Thu Feb 5, 2009
Good question. A Short Sale is a situation were the mortgage holder is asking the lender to accept less money than they owe on the home. A lot of current homes on the market right now are Short Sales. However, the list price you see is probably not an approved price from the lender. Up to this point most lenders will not give a set price they will accept as a Short Sale until an offer is made.

The real estate board requires specific language in listings for Short Sales, that is why you are reading the "may be" in the listing.

At best pricing on Short Sales are an educated guess.

I hope this helps!

Jeff Gould
CENTURY 21 Beggins
1 vote Thank Flag Link Thu Feb 5, 2009
Short Sale is as you say for the purpose of the bank accepting less than owed. The house might have been purchased for less the what it is listed for at this point, but the home owner might have re-financed at some point so the loan is higher then what the house is purchased for.
I hope this helps you.

Lars Kier
http://www.KierHomes.com
Lars@KierHomes.com
Web Reference: http://www.KierHomes.com
1 vote Thank Flag Link Thu Feb 5, 2009
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