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What is a Short Sale? Short Sale is a real estate sales transaction where the seller's lender agrees to adjust the amonut owed on the mortgage and accept less than is owed and forgives the remaining debt, in order to get the property sold and avoid foreclosure.Serving Chicago and most Suburbs 

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Why Banks do Short Sales? Short Sale is an option that makes more financial sense to the lender than foreclosure. By doing a short sale, banks can often recover 80-90% of the estimated market value of the property, as opposed to an auction sale that could only bring 50% of the market value or less.

- Short Sale is less damaging both to the lender and the property seller than foreclosure.

- Short Sales are popular in declining markets where home values are now lower than homeowners' outstanding real estate debt obligations and a short sale is the only way to get the property sold and avoid foreclosure. 

- Short Sales require seller's lender and all lien holders approval. Our job is to make sure you get the approvals.

- Your bank could let you do a short sale, and agree that you sell your property to a 3rd party for less than you owe in mortgages, forgiving the balance, if you're in a financial hardship or must relocate.

Related Terms & Definitions.

Short Sale (Pre Foreclosure Sale - Short Sell - Short Pay).
Definition: Short Sale is a Real Estate Sales Transaction where the proceeds of the sale fall short of the property owner's outstanding real estate debt obligations (mortgage loans, real estate taxes, commissions, etc..).

A lender may agree to adjust the amount owed on the mortgage and accept less than a full payment to get the property sold and avoid foreclosure, by selling the property to a third party, forgiving the balance, if the seller is in financial hardship or must relocate, and a short sale is the only way to get the property sold.

Foreclosure.
Definition: Repossession of a real property. A legal process by which the lender forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage.

REO.
Definition: Real Estate Owned. Refers to Bank owned property aquired through foreclosure. If a property is foreclosed upon and does not sell at the sheriff sale (auction), it goes back to the lender and becomes an REO.

BPO.
Definition: Broker Price Opinion

 

Making an Offer on a Short Sale? What You Need to Know

Are you looking to buy a new home? Are you thinking that now's a great time to find bargains? Before you make an offer, it pays to know a little about the seller's situation.

If a home is being sold for below what the current seller owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.

A short sale is different from a foreclosure, which is when the seller's lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.

You're a good candidate for a short-sale purchase if:

• You're very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.
• Your financing is in order. Lenders like cash offers. But even if you can’t pay all cash for a short-sale property, it’s important to show you are well qualified and your financing is set. If you're preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.
• You don’t have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property—or you need to be in your new home by a certain time—a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.

If you're serious about purchasing a short-sale property, it's important for you to have expert assistance. Here are some people you want to work with:

• Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who's knowledgeable about the short-sale process will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.
• A qualified real estate professional.* You may have a close friend or relative in real estate, but if that person doesn’t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they've represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short-sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as “lender approval required.”)
• Title officer. It’s a good idea to have a title officer do an initial title search on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it's much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited for months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.

Some of the other risks faced by buyers of short-sale properties include:

• Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.
• Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.
• No repairs or repair credits. You will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.

The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.

* Not all real estate practitioners are REALTORS®. A REALTOR® is a member of the NATIONAL ASSOCIATION OF REALTORS® and is bound by NAR’s strict code of ethics.

Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA