What is the definition of a short sale?
This is a question that I am quite often asked throughout my daily real estate travels. Well, as always when I see an opportunity to educate my clients and potential clients based on all real estate related questions, I do not hesitate to share what I know so let’s get started with a solid understanding of what a short is so keep reading folks as we will make sense of this complicated scenario in order to make sure you get a thorough grasp of the Short Sale process.
What is it and what is the actual process of a short sale?
A short sale is when the mortgage lender agrees to allow the homeowner to sell their house for less than what the actual value of the mortgage truly is. Why would a lender allow this to happen? Glad you asked and the reason is that the lender would prefer not to foreclose on your home as a matter of dollars and cents in the lender’s eyes. Furthermore, the lender is viewing the bottom line based on their return on investment (ROI) so they (lender) still want to make money when the homeowner has had some “unexpected event” happen in their lives and can no longer afford the mortgage payments for their home.
How exactly does one get in a position where my house becomes a short sale?
First and foremost, I want to debunk a short sale myth that I hear all the time and that is you do not have to be behind on mortgage payments to have a short sale for your home so now that this is out of the way, let’s keep rolling. So in essence, a short sale is done to avoid foreclosure and the lender has to be absolutely convinced that the homeowner will soon default on their mortgage loan so once again, it’s about how the lender sees their financial investment (ROI) when it comes to your home. This happens because the homeowner has either lost their source of income (their job) or has had some catastrophic illness that will decimate their income and or savings or both which will lead to foreclosure.
Furthermore, the value of the house is basically not worth the mortgage amount and basically it is “under water” and the value is not coming back anytime soon hence the reason for a short sale and the infamous lender ROI financial approach that they wholeheartedly believe in. Wow, that was a wee bit too much information to take in all at once and you are 100% correct good people of Arizona but we need to get the facts straight as I plan a series of articles on Short Sales because they are a very important topic to wrap your head around and will give you a good foundation on what to do in case you find yourself in this “financial abyss” but never fear because Cash Now Homes is here to help you when you need us most so let’s keep moving forward so we can get that proverbial ‘handle” on this commonly asked real estate related question.
The next step is the actual ease of a short sale and the answer is that it is not easy at all and in fact, it is rather complex but I will make this real simple for you so no worries there. The concept may be simple but the process of a short sale is what is complex. So what’s so hard about it?Geez, you folks are real sharp asking all the right questions and what makes it difficult are the following details that need to be gathered in order to complete a short sale so please see below:
All the listing and sales documents need to be drafted in order to allow the seller of the home to cancel without there being any liability should some type of obstacle arise and the short sale itself does not prove to be advantageous at all so one can back out of the short sale.
Now for the potential short sale buyer, we suggest you work with an experienced realtor (Cash Now Homes has a real estate broker who has the needed expertise to do this) to include a highly skilled attorney at law in order to successfully avoid and guide you through all the potential pitfalls that can unexpectedly rear its ugly head and you don’t need this potential financial headache.
Some of the potential pitfalls are post sale deficiency liabilities and tax liabilities as well but can be avoided with the right realtor or attorney that can access all financial records for the potential short sale property and will unveil if there is more than one mortgage at hand to include more than one lender and the reason it makes a short sale process complex is because you have more than one player with “skin in the game” if you will as they both (lenders) have to come to a mutual agreement for the short sale or the short sale itself will not become a reality and you are out of luck and headed towards foreclosure.
Now you know why we need a skilled realtor to include an experienced attorney in order to uncover the potential twists and turns that can completely blow a short sale into smithereens and something you as the homeowner want to avoid if you want to do a short sale but you are in luck today as Cash Now Homes has the needed experience and will provide the assistance you are looking for when you most need us.
Well I feel like this is a good point in time to stop but once again, please know that this is a series of articles that will delve into all the minute details of a short sale in so we look forward to you visiting us again as we will keep educating you on important topics that crop up each and every day in my daily real estate travels throughout Metro Phoenix.
If you have questions about a short sale please call me I'm happy to help.
George Aplicano
Partner Cash Now Homes
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