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Priority One Realty Inc.14910 125th Street KP N
Gig Harbor, WA 98329
Short Sale
What is a Short Sale?
BY definition a short sale is the sale of real estate in which the proceeds of a sale will fall short of the balance owed on the property’s loan. This most often occurs when the property owner can no longer make payments and cannot sell the property for the amount owed due to a fall in the property value. The lender and the property owner agree that it is a better path to sell at a moderate loss rather than go through the costly and lengthy process of foreclosure. The property owner may or may not be responsible to the lender for the difference between what is owed on the mortgage and the proceeds of the short sale.
How Does it Work?
Each short sale is unique, however there are some common elements. A typical short sale scenario looks like this. The property is listed for sale at a price that is determined to be one that will attract buyers and might be acceptable to the lender. (Note: Low prices that seem to good to be true probably are. Unless specifically stated as pre-negotiated these low prices have not been agreed to by the lender. ) Once a contract to purchase has been mutually agreed upon by the property owner and a buyer, the contract is then forwarded to the mortgage lender for approval. A negotiator must be assigned ( hired ) to the transaction. The negotiator must be paid. That is a subject of much discussion as to who should be responsible for the negotiator fee. Once a negotiator has been hired he/she begins to work the process with the lender. Each lender may have a different process and there may be more than one loan on the property. Short sales with only one lender are much easier to negotiate and close. This part of the process differs from lender to lender, but it is safe to say if this property has not been pre-negotiated a reasonable expectation would be a wait of 45-90 days. During this waiting time the lender has ordered BPOs ( Broker Price Opinions ) and appraisals of the property value. If the property is priced well below market value, expect a counteroffer from the lender at market value. Lenders may or may not be willing to contribute to buyer’s closing costs. Lenders who are willing to pay closing costs many times limit the contribution to 3% of selling price. Should the buyer wish to counter the lender’s counteroffer, then allow several days in between responses. If the counteroffer by the lender is acceptable to the buyer, a reasonable closing time from this point would be 30-60 days. This is a typical description of the process which has wide variables. Buyers typically have the option to continue looking for another property to purchase and if by contract can terminate their short sale offer anytime prior to the lender’s acceptance. By contrast many times the lender continues to take offers on the property during the negotiation period and may look at all offers when they are ready to make a decision.
Buyers should have full understanding of the risks and use caution when entering in to a short sale contract. Many times properties are not being maintained and can suffer deterioration or damages during the negotiation period. There is no guarantee that the lender will agree to a short sale and many buyers are disappointed after a long wait. On the positive side and with some patience, a short sale can prove to be beneficial for both buyer, seller and lender at a fair current market price.