what is ashort sale?

Asked by Fdafoo, 11727 Sat Oct 3, 2009

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Trevor Curran, Mortgage Broker Or Lender, Great Neck, NY
Wed Aug 8, 2012
A short sale is a different kind of transaction than the normal real estate purchase. You are essentially going to wait while the Seller negotiates with their Lender(s) for approval to sell you the house at a price lower than what is owed to the Lender(s). This process can be lengthy, even stretching out to many months before you have a final answer.

You'll need two things during that time:

1. Patience. While you've submitted all your documents to your Lender for your mortgage approval, and you keep your documents current and updated, you'll grow frustrated with the lack of any communication from the Seller about the status of the short sale. This is common, both the poor communication and the Buyer's frustration. Prepare for it.

2. Maintain your credit scores. Be sure not to make any dramatic changes to your credit report that could affect your credit scores. Pay all bills on time. Don't CLOSE any accounts. Don't open any new accounts. Don't run up your outstanding balances to max your revolving debt.

Once the short sale is approved, you may find the price you offered is not acceptable to the Seller's Lender. They may come back and counter-offer your price, so you will have to reconsider at that time if you wish to pay more than your original offered price.

The three rules of real estate: Location, Location, Location.
The three rules of short sales: Patience, Patience, Patience.

I hope that helps!
Trevor Curran
NMLS #40140
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Simon Harris…, Agent, Sag Harbor, NY
Tue Aug 7, 2012
It's when a house sells for an amount "short" of the mortgage. It has to be approved by the bank that "owns" the mortgage, That often takes time to get answers. This is because mortgages were bundled together, "pooled" with other mortgages and sold as bonds, or "Mortgage Backed Securities", or an "MBS"; The buyers of these bonds bought pieces of them called "Tranches". Those Tranches are "horizontal" slices or even "vertical" slices. When those individual mortgages go bad, they affect the MBS, and their slices that were sold off. One mortgage might involve one original MBS, but be involved in many tranches, (Synthetic MBS), as well as CDOs which are in fact insurance on tranches, or bets that they would perform or default. Derivatives.

1- Most mortgages that are eligible for being sold short are "underwater".
2- Underwater mortgages are more than the house's current market value.
3- The contact between the homeowner and the mortgage is often a bank, but only the "servicer" of the loan, not the owner.
3- The actual owner of the mortgage is not always a bank but an "investor" and;
a- an "Investor" is sometimes a fund owned by as many as thousands of people
b- an "Investor" is sometimes a fund that owns only a "section", or "slice" or "tranche"
c- there were different rules on how to treat an individual loan or tranche in each bond.
d- Some individual investors get paid better if the loan is foreclosed than if it's sold short of the mortgage or if it's "modified" (lowered for the homeowner or seller to be made more affordable by just lowering the payments, reducing principal, or a combination). Many lawsuits, arguments.

In "Short", if the house is overfinanced and is defaulting, it will start investors arguing and litigating. There are many solutions being offered to make a short sale happen, but rarely will everyone win, and the people and investors that will be taking the losses, object enough to stall and delay the whole process, sometimes for a very long time. A Real Estate Broker has to know how to wade through this process for their client and for their customer. Because each situation is different, it's caused a significant "dislocation" in the marketplace for years, and maybe for many more years.

A pre-approved short sale or an REO, (a finished foreclosure) suggests this process is cleared up already, but it depends on who "pre-approves" it. As an "homebuyer" investor, I have found significant value outside short sales and foreclosures. This is because distress sales lowering the prices in the marketplace. Everyone is different...best of luck in all your adventures.

Simon Harrison
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Dallas Texas, Agent, Dallas, TN
Sun Oct 4, 2009
Requires bank approval purchase property from property owner.

Owner has requested bank take less than mortgage amount where they can sale property.

I have been a listing/buyers agent with short sales is always drama, not due to agents banks why of conducting business.

Buyers Agent can detail more for you

National Featured Realtor and Consultant, Texas Mortgage Loan Officer, Credit Repair Lecturer
Follow me on Twitter: http://twitter.com/Lynn911

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Jaishree..Ja…, Agent, Woodbury, NY
Sun Oct 4, 2009
When the homeowner is behind on the mortgage payment and current value of the house is less than the loan amount. If the seller and bank agree to sell the house, where the bank is willing to sell the house for less than the currrent loan amount. The homeowner must qualify for hardship that they can't hold the mortgage. It takes a longer time than the regular sale. Good Luck
Jane Zilpelwar
Web Reference:  http://www.JaneZilpelwar.com
0 votes
Bill Eckler, Agent, Venice, FL
Sun Oct 4, 2009
A short sale is is a transaction in which the seller owes more to the bank than the home is worth and the owner works with the bank to agree to sell the home for less than the amount that is owed on it.

These sales are typically very slow and challenging for buyers, sellers, and agents.....and too often result in disappointment.

Our advice is to consider all options when seeking a good value....including traditional sales and foreclosures.

Good luck
The Eckler Team
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Ralph Windsc…, Agent, Hauppauge, NY
Sun Oct 4, 2009
A short sale is a situation where the current owner of a home may have bought the home when prices were higher or continued to take money out of the house in the form of refinancing or second or third loans and owes more money on the house than the house is worth in the current market. If the owner can no longer afford to pay the mortgage and wants to sell the house rather than go to foreclosure, that owner goes to the bank and asks whether they will accept less than the owner owes on the property. If the bank agrees, any potential offer on the house has to be approved by the bank in order for the sale to go through. If you're thinking of purchasing a home via short sale, I would be pleased to assist you. Please feel free to contact me by phone or email.

Ralph Windschuh
Certified Buyer Representative
Associate Broker
Century 21 Princeton Properties
0 votes
Debra (Debbi…, Agent, Livingston, NJ
Sat Oct 3, 2009
Hi Fdafoo

To keep this simple............
A short sale is a situation in which the seller owes more to the bank than the property is worth. Rather than having to bring money to the closing table to make up the shortage, the seller is asking the bank to accept less for the home. In order to be allowed to do this, the seller would need to show a hardship of some sort - those stipulations depend on the lender.
Although your credit will be negatively affected by a short sale, it won't be as bad as with a foreclsoure.

If you are thinking of going the short sale route - check with your lender first. These sales can be delayed and take many months while the parties wait for final bank approval.

Good luck....
Debbie Rose
Prudential NJ Propertties
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