Although they are less common today than in the years immediately following the market crash, short sale listings do still occasionally hit the market. So, what exactly is a short sale?
Short sales happen when a homeowner owes more on their mortgage than the home is worth; however, short sales are rarely granted to sellers who simply want to move. Usually, a hardship must be demonstrated showing a pressing need to move, rather than just a desire. For example, if a military homeowner receives orders to relocate to a duty station in another part of the country, this would likely be considered a hardship since they are not simply choosing to move. The reason a hardship is most often required is because the bank is essentially agreeing to forgive the difference between the sales price of the home and the mortgage payoff amount.
A homeowner wishing to sell a home under the terms of a short sale must work closely with the bank that holds the mortgage on the home. Each lender has its own process to follow when seeking short sale approval. Some banks require you to apply and be approved for a short sale prior to listing your home on the market; conversely, some lenders won't even review a short sale application until a written offer has been received from a potential buyer.
Your Hall & Nixon REALTOR® can guide you through the process and help you figure out the next steps; however, it will still require some legwork on your part as a seller because you will have to make contact with your bank directly (even if only to give authorization for your agent to communicate on your behalf), prepare documentation for your hardship, complete short sale application paperwork, etc. Additionally, we highly recommend that you seek the advice of an experienced short sale attorney to handle your sale - attorney experience is essential for a successful short sale transaction.
The biggest misconception about short sales is that they happen quickly. The "short" part in the name is misleading...it means the seller is going to be "short" in paying off their mortgage, NOT that the sale timeframe will be short in length. We have seen short sales last in excess of one year from contract to closing. On average, most take about 90-120 days. That amount of time can feel like an eternity to all parties involved, especially when there is no news to be shared while the bank reviews the application behind the scenes. Many mortgage lenders are notorious for their lack of communication during a short sale approval period - you'll go weeks (sometimes months) without any word, and then suddenly there is a frenzy of activity when they reach a decision.
Overall, short sales can be a good value for a buyer, but to reap the reward the buyer must be patient with the process. If you are considering a short sale as a buyer or seller, obtain guidance from your favorite Hall & Nixon REALTOR®. If selling, we also recommend seeking counsel from a short sale attorney and a CPA (if you are unsure about any credit or tax ramifications that may result from a short sale transaction).
