One of the most common questions I get when speaking with my clients and prospective clients is: What is a Short Sale? In this post I will do my best to explain short sales in simple terms to hopefully help clear up any confusion as to what they are and how they work.
In a nut shell, a short sale is when a home owner needs to sell their home for less than what they owe to their mortgage company. With the collapsing of the real estate bubble back in 2008 and the consequential recession, many home owners were left in financial distress if not ruin. Homes dropped sharply in value, millions of dollars worth of equity was lost, almost over night. As a result, many people were left under water in their properties, meaning they owed far more for their homes than they were then worth. Unable to make their mortgage payments, millions of Americans faced bank foreclosure: the financial institution repossessing a property due to default of payment. As a homeowner, if you have a property, and you owe $300,000.00 but the current market value for the home is only $200,000 and you are unable to make your payments, what options do you have? You could try to sell the property for the market value, but you would be left owing the bank over $100,000. You could walk away from the home and allow the bank to repossess, but that would destroy your credit for years and open yourself up to possible litigation from the bank. Most owners have made the choice to attempt a short sale of their home. To do this, they list their home for market value, get an offer from a potential buyer, then they take that offer to the bank and try to negotiate with them to accept that offer as payment in full. So the bank would need to agree to accept $200,000 rather then the $300,000 that is owed. The negotiation process is often complicated and tedious. It requires hours to be spent on the phone by a Realtor or a professional negotiator. From start to finish most short sales are taking between 3 and 8 months, with some taking as long as a year to settle. Because of this, the properties are on the market a very long time, many short sales end up with multiple offers. When the home is being occupied the seller may choose to not allow any more showings while the negotiation process is working itself out. Because the process is very long, many times buyers will back out. This can happen for various reasons such as, the buyer finding another home or the buyer determining not to buy. When this happens the seller will then choose a back up offer to send in to the bank in its place.
Once the bank and the buyer settle on a price and a set of terms, then the property goes under contract and moves forward similar to any other sale.
My team of experts and I specialize in Short Sales. If you or anyone you know is in jeopardy of potentially losing their homes to foreclosure, let them know that there are options. We can short sale their home, often at almost no cost to them, and get them out from under their mortgage and help them get back on their feet. Call me anytime with questions, I am happy to help you with all of your Utah Real Estate needs.
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Kenny Maddy
Elite Realty Group
801-599-3744
MaddySold@gmail.com
