Short Sale Preparation is the Key to a Smooth Transaction
Posted by Todd Covington on Sunday, October 23rd, 2011 at 11:17pm.
A friend of mine here in Beaufort recently informed me of his desire to buy a home, but he made it clear to me he wanted nothing to do with a short sale. My friend had heard horror stories about short sales dragging out for months, only to end up with the bank turning down the offer, and leaving both buyer and seller frustrated.
A short sale is a situation in which a property owner accepts an offer on his property. However, because the offer to purchase is less than the owner's mortgage, the offer is subject to bank approval. It happens all the time in today's real estate market. I just had a deal blow up in Bluffton recently because the bank did not move fast enough to satisfy the buyer, who needed to close in 30 days.
Many Beaufort, SC buyers who purchased homes in the 2004 to 2006 time frame -- the peak years -- have found themselves owing more on their homes than they are worth. Let's say you purchased a home for $400,000 in Spanish Point, a great waterfront neighborhood in Beaufort's Mossy Oaks area. Interior homes in Spanish Point frequently sold in the $350,000 to $500,000 price range during this time period, depending on size, upgrades, etc.
But in 2011, based on overall market depreciation in Beaufort over the past few years, your home may very well only be worth $300,000. Yet you may still owe $360,000 on your mortgage. In the meantime, a willing and able buyer shows up and presents you with an offer of $310,000, a very fair offer based on today's real estate market. What do you do? You take the offer to your lending institution, and see if they are willing to eat that $50,000 shortfall on the mortgage payoff.
This kind of real estate transaction can be long and drawn-out. After all, the bank is making the very big decision to eat tens of thousands of dollars of money it is legally owed.
But, as I told my friend, not all short sales are created equal. I have seen short sales drag along for five months and then fall apart. Then again, I helped facilitate a short sale a year and a half ago which closed in 30 days, a very normal closing period.
Short sales are so common these days that the Beaufort County Association of Realtors has changed our Multiple Listing Service to identify a property as a short sale or a potential short sale.
If you are a seller, you might be able to approach the bank before putting your home on the market, point out that your home is worth less than the mortgage owed, and see if the bank will approve a short sale in advance. Having a short sale approved in advance could make the home more attractive to buyers, like my friend, who was very skeptical about the short sale process.
Whether you are a buyer or a seller, rely on your Realtor to help guide you through the short sale process. By now, members of the Beaufort County of Association have had plenty of experience with short sales.
A short sale is a situation in which a property owner accepts an offer on his property. However, because the offer to purchase is less than the owner's mortgage, the offer is subject to bank approval. It happens all the time in today's real estate market. I just had a deal blow up in Bluffton recently because the bank did not move fast enough to satisfy the buyer, who needed to close in 30 days.
Many Beaufort, SC buyers who purchased homes in the 2004 to 2006 time frame -- the peak years -- have found themselves owing more on their homes than they are worth. Let's say you purchased a home for $400,000 in Spanish Point, a great waterfront neighborhood in Beaufort's Mossy Oaks area. Interior homes in Spanish Point frequently sold in the $350,000 to $500,000 price range during this time period, depending on size, upgrades, etc. But in 2011, based on overall market depreciation in Beaufort over the past few years, your home may very well only be worth $300,000. Yet you may still owe $360,000 on your mortgage. In the meantime, a willing and able buyer shows up and presents you with an offer of $310,000, a very fair offer based on today's real estate market. What do you do? You take the offer to your lending institution, and see if they are willing to eat that $50,000 shortfall on the mortgage payoff.
This kind of real estate transaction can be long and drawn-out. After all, the bank is making the very big decision to eat tens of thousands of dollars of money it is legally owed.
But, as I told my friend, not all short sales are created equal. I have seen short sales drag along for five months and then fall apart. Then again, I helped facilitate a short sale a year and a half ago which closed in 30 days, a very normal closing period.
Short sales are so common these days that the Beaufort County Association of Realtors has changed our Multiple Listing Service to identify a property as a short sale or a potential short sale.
If you are a seller, you might be able to approach the bank before putting your home on the market, point out that your home is worth less than the mortgage owed, and see if the bank will approve a short sale in advance. Having a short sale approved in advance could make the home more attractive to buyers, like my friend, who was very skeptical about the short sale process.
Whether you are a buyer or a seller, rely on your Realtor to help guide you through the short sale process. By now, members of the Beaufort County of Association have had plenty of experience with short sales.