What is a Short Sale?
Many sellers have many reasons why home selling is a part of a large decision in this current economy. The largest one is a question they ask themselves; “How do I sell my home for less than what it’s worth?” In this case – when a home owner cannot afford the monthly mortgage payment and they are facing circumstances where they want to take the right measures to sell to avoid foreclosure, this is called a Short Sale.
What is a short sale is – a homeowner makes an agreement with their mortgage bank to sell their home for less than what they owe. Mainly unforeseen circumstances are a part of the reason they need to sell. Some of these circumstances are divorce, death, job loss, income decrease, illness.
During a short sale process, a licensed real estate agent will walk the seller through all steps involved. First step is a current market value of a home using data from MLS (multiple listing services), which is accurate data – not a “zestimate” as seen on Zillow. Next step is authorizing a licensed real estate agent who has experience and specializes in REO/Short Sales to assist.
The common question – “If I need to sell my home under a short sale and the bank works with me to do so, how do you, the agent, gets paid?” Approaching the answer to this common question upfront in this article is like this: you agent is paid through the transaction and their brokerage firm will co-broke to a buyer’s agent via the terms of the listing agreement you, the seller, signs and a copy is given to the bank that is working with you to sell your home for less than what you owe.
It’s important to understand the bank will require the seller to remain and stay in compliance with them. Part of working with a mortgage bank to agree to sell your home less than what you owe is actually writing a letter of reasons why you are facing hardship. Also understand the bank does want to work with homeowners in these situations to sell the home and avoid a foreclosure action too.
It is wise to always seek and prepare the advice of an attorney as well. And not to fear – if you or someone you know fall under this circumstance, I have never seen anyone without a home to live in. Hardships are happening every day to millions of people because of the economy. But one fact of knowledge anyone who entertains to sell their home under a short sale agreement needs to also understand the bank is the third party approval via any offer that the seller accepts and the buyer(s) must also be in compliance with the bank as well along with understanding they are purchasing a short sale that is subject to the bank’s approval.
There is light at the end of the tunnel. Selling a home under a short sale agreement is not what I would advise to do on your own. Keep in mind when doing this, the bank will not allow a seller to keep any type of profit, meaning a seller who sells under a short sale agreement does not make any money from the sale.
I have seen sellers sell under a short sale agreement with their banks based on unforeseen circumstances and still make the mortgage payment until the home is sold and closed – resulting in a seller purchasing another home that is more affordable for them. But not every homeowner is able to keep up with this practice. The best knowledge to know and be aware of when can you buy a home again after you sell under a short sale agreement.
Contact Alan Barberino for all your Property Management, Leasing and Real Estate Sales needs. Visit www.BarberinoRealEstate.com