Short Sale – What Is It Really?

short shortsWith all the press and articles written about short sales, as a Realtor I assumed everyone knew what that meant. To my surprise, I got the question from a San Ramon resident  just the other day “what is a short sale–is it like a foreclosure?” The short answer is “no”.

A Short Sale simply means the house is being sold for less than the loan amount and must be approved by the lender holding the mortgage. The confusion by many is the Seller’s/Owner’s role in all of this. The owner of the property is the one who accepts an offer from a buyer. Regardless of what the owner accepts, the bank makes the final approval on the sales price and terms.

The owner if they want the property to be sold “short” step back and let the bank make sure the transaction closes. It is the owner who will sign all of the closing papers, yet they have no say in the negotiations. The owner does not get anything from the sale of the property.There can be no reimbursement of realtor commissions to the seller. Everything involved in the transaction must be noted on the HUD-1 and approved by the lender.

More confusion sets in when a buyer has not been properly prepped for what to expect when making an offer on a short sale property. These transactions do not close quickly and may not even close for the price offered by the buyer. The lender will not just accept the offer blindly. They will do a BPO (brokers price opinion) to determine if the offer is above, below or at the going market price. If it is below, you must be prepared to raise your offer if the bank comes back to negotiate for the higher price. This is when some buyer’s decide to remove their offer.

The difference between a short sale and a foreclosure is the impact on one’s credit. A foreclosure will show up on a credit report. A short sale will not. What will show up is late mortgage payments. People with short sales may be eligible to purchase a home within 2 years. Those with foreclosures can take up to 7 years before a repurchase is possible.

There are incentive programs from many lenders ranging in dollar amounts of $2500 to over $20,000 to encourage and assist an owner to participate in a short sale.Check with your lender to determine if they have such a program.

If you are a San Ramon homeowner behind on your mortgage payments and would like more information about the short sale process, please contact us 925-415-3046.

About Linda Urbick Linda

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Filed under: Real Estate

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