A short sale is often misunderstood, and you will likely hear one or more of these complaints or misconceptions.
The first complaint may come from a real estate agent.
"I won't make any money on a short sale, so why should I help you?".
The reality is a real estate agent or broker still has the opportunity to make a very good commission on a short sale.
Their maximum commission is 6%.
If you are the home owner, you probably want to work with a discount broker who will accept a lower commission.
A 6% commission on a $150,000 home is $9,000, I don't believe that qualifies as "I won't make any money.
" Another thing you will hear from either friends or family, "You can't sell you house for below what you owe, the bank will never agree.
" Banks are probably more aware of the declining value of the local property than you or I.
They see the changes occurring through their loan department.
The bank may not prefer to enter into a short sale of your property, since they will take a loss, but they will work with you to reduce their loss.
The bank will evaluate the current market value of your home by requesting a BPO, or by having an appraisal done.
After they receive the current market value for your home, they may allow a sale as low as 90% of current market value.
As we've seen in the news lately, homes in many parts of our country have declined in value by as much as 50%.
If you use a 70% decline in market value as an example, a $200,000 home purchased 5 years ago, the home now has a market value of $140,000.
If the bank allows a 90% of current market value sale, the buyer could be offering as little as $126,000.
In a short sale, the bank may consider this as repayment in full on the loan, irregardless of the amount you still owe.
A common issue people discuss on a short sale, is the length of time.
Many people have the idea that a short sale always takes over 12 months to complete.
Let's take a look at the timeline, and see what you might expect.
Once you have an offer in hand, you will need to fill out and submit your short sale packet to your lender.
Expect the lender to take approximately 1 to 2 weeks to confirm they have the packet in hand, and have assigned someone to work with you.
Then you can expect about 1 to 1 1/2 months to pass as the bank's negotiator reviews your short sale offer, compares the market values, and then either approves, declines, or asks for changes to the deal.
Once you have received approval from your lender, you can expect the normal 1 to 2 week closing cycle to take place on your property.
As you can see from this timeline, you could have a short sale approval and closing in as little as 2 to 3 months.
The process does take longer than a normal sale.
One last concern to cover.
Do you need to be behind on your payments before you request to sell your home in a short sale? No, you can be up to date, making every monthly payment, which is of course ideal.
You need to prove financial hardship, which if you are pulling money from savings, retirement funds, or borrowing from family, in order to maintain your payment, then you can show financial hardship.
You will need to draft a hardship letter, and also provide the bank with a detailed financial statement to prove your hardship status.
Hopefully this helps dispel a few of your concerns about a short sale of your home.
While the process takes more effort and time, completing a short sale can relieve the burden and stress of being financially overwhelmed by your mortgage obligation.
The first complaint may come from a real estate agent.
"I won't make any money on a short sale, so why should I help you?".
The reality is a real estate agent or broker still has the opportunity to make a very good commission on a short sale.
Their maximum commission is 6%.
If you are the home owner, you probably want to work with a discount broker who will accept a lower commission.
A 6% commission on a $150,000 home is $9,000, I don't believe that qualifies as "I won't make any money.
" Another thing you will hear from either friends or family, "You can't sell you house for below what you owe, the bank will never agree.
" Banks are probably more aware of the declining value of the local property than you or I.
They see the changes occurring through their loan department.
The bank may not prefer to enter into a short sale of your property, since they will take a loss, but they will work with you to reduce their loss.
The bank will evaluate the current market value of your home by requesting a BPO, or by having an appraisal done.
After they receive the current market value for your home, they may allow a sale as low as 90% of current market value.
As we've seen in the news lately, homes in many parts of our country have declined in value by as much as 50%.
If you use a 70% decline in market value as an example, a $200,000 home purchased 5 years ago, the home now has a market value of $140,000.
If the bank allows a 90% of current market value sale, the buyer could be offering as little as $126,000.
In a short sale, the bank may consider this as repayment in full on the loan, irregardless of the amount you still owe.
A common issue people discuss on a short sale, is the length of time.
Many people have the idea that a short sale always takes over 12 months to complete.
Let's take a look at the timeline, and see what you might expect.
Once you have an offer in hand, you will need to fill out and submit your short sale packet to your lender.
Expect the lender to take approximately 1 to 2 weeks to confirm they have the packet in hand, and have assigned someone to work with you.
Then you can expect about 1 to 1 1/2 months to pass as the bank's negotiator reviews your short sale offer, compares the market values, and then either approves, declines, or asks for changes to the deal.
Once you have received approval from your lender, you can expect the normal 1 to 2 week closing cycle to take place on your property.
As you can see from this timeline, you could have a short sale approval and closing in as little as 2 to 3 months.
The process does take longer than a normal sale.
One last concern to cover.
Do you need to be behind on your payments before you request to sell your home in a short sale? No, you can be up to date, making every monthly payment, which is of course ideal.
You need to prove financial hardship, which if you are pulling money from savings, retirement funds, or borrowing from family, in order to maintain your payment, then you can show financial hardship.
You will need to draft a hardship letter, and also provide the bank with a detailed financial statement to prove your hardship status.
Hopefully this helps dispel a few of your concerns about a short sale of your home.
While the process takes more effort and time, completing a short sale can relieve the burden and stress of being financially overwhelmed by your mortgage obligation.