Short-Sales are something that every real estate agent and consumer should be familiar with. Unfortunately for many people, in today's market there are more short-sales than ever. There are several things that people who work with these kinds of properties need to be familiar with. We'll cover what a Short-Sale is and how it might affect the homeowner
When there is a valid offer from a buyer, the agent then helps the homeowner collect all the appropriate data the lender needs, sends it to the lender and awaits a decision. There is a great deal of information that the lender will require, and it is very important to be extremely diligent in collecting ALL of the information the lender requests. Once the agent has all the documentation and submits it, this offer is just like any other offer made on a property, and the property listing will go to a status of "Offer Under 3rd Party Review" on the MLS. If the agent and owner wish to continue marketing the property while the offer is being considered, then the listing can continue with an "Active" status. If they do not wish to consider other offers, the status should be changed to "Under Contract." This means that it will no longer be searchable as an active property.
Some have wondered why a lender would accept a short-sale rather than just foreclosing on the home and then selling it themselves. First, most lenders are not in the business of owning residential real-estate. Their success depends on the money flowing THROUGH their business, not sitting static in a home they have to manage. Second, the foreclosure process is a LONG process, typically taking 6 to 12 months, during which time the bank isn't receiving payments, and can't use the money tied up in the home. Third, according to the Joint Economic Committee of Congress, a foreclosure typically costs the lender at least $50,000. Finally, after a foreclosure, the lender can still only sell the home for market value (after they spend some money getting it ready to sell). This is why it makes sense for the lender to accept a short-sale at market value now, rather than accepting the same market value after having foreclosed on the home.
That said, some lenders have a policy of simply never accepting a short-sale. Other lenders have some very specific criteria for a short-sale. The better relationship an agent develops with the lender and the more knowledge the agent has about the lender's criteria, the better the agent will understand how to perform his or her duties for the homeowner.
One other thing to keep in mind during this process is that it is an extremely difficult process for the homeowner. In addition to whatever problems are forcing the sale of the home, there may be significant financial consequences to the homeowner that will extend far into the future. There may also be other problems such as divorce, illness or bankruptcy involved. Be sure to keep the emotional effects of all this in mind as you work through the short sale. Some homeowners have taken advantage of various church resources, support groups or even professional counseling to help.
