I have been getting this question asked quite often lately with Real Estate in Massachusetts taking the proverbial "big hit".
For those that have been hearing the term "short sale" and don't quite understand what it means, a short sale is a legal lender approved solution designed to assist those home owners who are financially strapped to get out from under their mortgage debt.
A short sale is negotiated through the mortgage holder of an owners home where by the mortgage holder agrees to take less than what home owner owes on the property.
An example of a short sale would be if a home owner owes $400,000 on their current mortgage and their home is only worth $375,000. The lender in this example would agree to take a short fall of $25,000 at closing. In many cases the mortgage holder may completely wipe out the debt and the home owner does not have to repay the 25k.
The home owner benefits in this situation because they get out of a sticky financial mess without going to foreclosure which can seriously damage your credit.
You may be thinking why would a mortgage holder want to allow a short sale? There are a number of reasons, most notably the cost involved for the lender going through a foreclosure proceeding. The mortgage holder when all is said and done can easily spend $40,000-$50,000 going through a foreclosure. This avenue can save the lender money they would otherwise lose.
With property values continuing to drop in Massachusetts there are many more lenders who will consider the short sale route.
As a Realtor representing a seller in a short sale scenerio there some issues you need to be aware of. See Ethics in a short sale for an explanation.
When selling your home and you know you are going to be faced with a short sale make sure you choose to work with a good Realtor who has some working knowledge of short sale procedures! A good Real Estate lawyer in your corner who has worked with short sales would also be an important consideration.
For a more in depth view of some of the other things worth mentioning regarding short sales see Massachusetts Short Sale Realtor.
Here are a few other short sale articles worth reading:
Avoiding foreclosure through a short sale or loan modification
Short sales and deed in lieu of foreclosure
Massachusetts short sale problems to avoid
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About the Author: The above Real Estate information on what is a short sale was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356.
Have a home to sell in Metrowest Mass? I have a passion for Real Estate and love to share my marketing expertise!
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22 comments:
Bill, short sale sure has become the lingo in this day and age. There are a few in my market area and now with a new Law that Washington State has put into place which excluded everyone in a real estate transaction except real estate agents (will be changed in the 2009 legislative session) a real estate agent that is experienced in short sales is a must. I so feel for those that have to take this route. Your articles and blog posts show you have the expertise for your area.
Jo it is a shame that it has become so common place. There are more and more people who are being forced to go this route. You are right about having a Realtor who has some short sale knowledge. As you know these transactions involve more parties and typically are not easy.
It seems like all I see nowadays are foreclosures and short sales on the MLS.
A knowledgeable person is key to success in short sales. Great post.
Jonathan Christopher of Short Sale Way
Short sale and foreclosure are the scarecrows of the contemporary US real estate market. I'm a Toronto real estate agent. I've been keeping track of the recent developement in the states and I must say that it comes to as quite a surprise that the federal government waited so long to take decisive action in this matter. I guess the latest housing stimulation bill comes a few clicks too late for some former homeowners. Well, I hope that there will be an end to this trend.
Elli
Elli you are right and the problem will most likely get worse before it gets better.
Hi
I think short sale in not long term investment and where an agent see the less benefit they sell their property.
Property Brazil I am not quite sure I understand what you are saying? A short sale could be a good long term investment?
Short sales are an efficient way for the banks to get bad loans off their books and for real estate investors to find good deals. Earlier in this foreclosure cycle the banks seemed reluctant to accept low ball short sale offers - and their loss mitigation departments were ill equipped to handle the process effectively. Now, it seems the banks have capitulated and realize that they are not capable of managing the inventory of REO properties they have foreclosed on. Short sales are the preferred option, but you need to know how to handle them - and the loss mitigation department, which can be a black hole sometimes.
Greg your right about banks getting more savvy when it comes to accepting short sales. It would be great if the banks could get their act together when it comes to response time on offers. If this was improved Real Estate agents would be more willing to be involved with a short sale property.
I was researching how to handle short sales in real estate and came across your blog. Your post came up on page 1 of a Google search "real estate short sales". Thanks for your post and it looks like you are doing some amazing work up there in MA. Keep it up and good luck!
It's quite amazing how this activity in the United States has become somewhat commonplace. I think it speaks to the underlining uncertainty in the market, and the increasing volatility in some markets. Interesting article indeed
Jessica thanks for the compliments on my post about short sales:)
Toronto Uban Homes - You are correct the short sale is the end result of what has happened to many home owners who have purchased a property at the height of the market or can not afford the payments any longer. It is truly sad.
Luckily Toronto real estate market has not been affected this much but short sales are also a problem, upscale downtown Toronto condos are affected too!
What does a buyer need to consider in a short sale?
Darlene as a short sale buyer one of the most important things you need to know is the time involved in getting an approval from the lender. Most short sales take months to get approval and in some cases can take up to a year. If you don't have the time to wait then a short sale would not be the type of property to get involved with. The short sale also may not get approved and you will have wasted a lot of time. I would make sure you have a good buyers agent that is familiar with short sales.
Excellent blog keep it up
Things have really exploded in short sales. Agents that are not actively focusing on marketing towards short sale sellers and buyers are truly missing the boat.
When selling your home and you know you are going to be faced with a short sale make sure you choose to work with a good Realtor who has some working knowledge of short sale procedures!
I must say the main advantage of short sale is that you’re safe from foreclosure, which damages your credit more than a short sale does. You don’t get to keep your home, as you do with a loan modification, but you limit the impact on your credit report and keep your credit options intact.
Being able to get a short sale closed in this market is critical. Having the knowledge to get them to close is invaluable. Thank you for your great blog post.
Bill - with todays downfall on the DOW, I think we will see more forclosures and short sales. And this is not just affecting USA , Canada is hit badly too now.
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