What is a shortsale? A short sale, is simply when a seller owes more on their home/or condo than they can sell it for. Example: John owns a house in Bellingham, WA. John paid $275,000 for it 3 years ago, and did a zero down loan to buy it, so he still owes about $275,000 on the house. He lost his job and can no longer make the payments. John meets with a Realtor and finds out the current market value is about $250,000. After he pays all of the closing costs, his net proceeds will be around $232,000. If John does not make his payments for 3-6 months or so, the house will likely foreclose and be taken back by the bank. This will drop his credit score by 200+ points, and he will not be able to buy for at least 3 more years. The bank may also go after him for liens against the home. To avoid foreclosure, hurt his credit less, and try to make a cleaner break from the home, he lists the home as a shortsale for $250,000. What happens when I write an offer on a shortsale? When writing an offer on a shortsale, the offer is subject to the seller's lender, agreeing to take the loss. The buyer may be able to get the home for a good price, but in most cases, will need to wait 3-7 months on average, to get a response and find out if the sale will get approved. Example: Betty is looking for a home in Bellingham Washington, and is looking up to $250,000. John's home (in above example) fits all of the criteria in Betty's search. She would prefer to find something that was not a shortsale, but this is the best home for the money, so she decides to write an offer. Betty writes an offer for $245,000 "subject to shortsale approval" which John accepts. They now have a signed around purchase and sale agreement. The fun part begins now, as they both wait for John's lender to review the proposed shortsale, and consider the loss. John (seller) is only able to pay back the bank $227,000 from the net proceeds from the offer for $245,000 from Betty's offer. John owes his lender $275,000, so the lender has to agree to take a $48,000 loss. The lender will require John (the seller) to fill out a shortsale package to PROVE that he can not pay his bills. This usually includes a letter explaining his situation, recent pay stubs (if he has one), 2 months bank statements, and a list of his assets. Once John turns in the paperwork, the lender will get other Realtors involved, to get multiple opinions on the value of the home. If the assessment says the value is near what Betty's offer is, AND John (seller) proves that he can't make his payments, than most the time, the lender will accept the loss and agree to the loss. Betty can then move forward with closing on the home. Shortsales have a high ratio of not closing the first time around. This usually is because the seller's lender sometimes rejects the sale, or the buyer gets tired of waiting, or the listing or selling agent are not doing their job. If you are a seller who is in the situation anywhere in Whatcom County or North Skagit County, and your looking for a Realtor who can help guide you this process, to get your home sold as fast and efficiently as possible, I have had 100% success rate selling homes through the shortsale process. There is also a new program called the HAFA program which is an alternative to a typical shortsale. I have blogged about it here. Buyers, if you want to consider buying a home that is in a shortsale situation, I can help you make that happen, or just consult with you on whether a shortsale makes sense in your situation. Contact me here. |