Tuesday, June 24, 2008

What is this SHORT SALE thing I hear about?

Occasionally... and more frequently as of late... persons are selling their real estate because of financial reasons. And the fact is that some of them can't sell the property for more than what they owe to a bank.

I know it seems bizarre, but this does from time to time happen. The bank holding the mortgage does not want to hear this, but their approach is that they would rather get some of the money owed to them and not have to take over ownership of the property and sell it later for less anyway.

So the sellers, upon getting offers on their house that will not cover the mortgage balance may approach the bank and propose a "short sale". The bank does not have to agree to it. Recently though, the banks are at least listening.

Certainly, if you are a saavy buyer, you make your offer based on your perception of what the fair market value is of the house you want to buy. You can't concern yourself with what the seller owes on the property. What they have done... refinanced, over leveraged, bought too high in the first place... whatever... does NOT affect the value of the house and you would be foolish to make a purchase based soley on what the current owner owes with no regard for what the fair market value is.

Be aware, that this process may take a little bit longer than normal. You will make an offer to the sellers, and just because they agree and sign a contract does not mean that the bank will "sign off" on a short sale. So once the seller has signed, the next hurdle will be talking the bank into it. So, there is a little more time and patience required.

In a way, a short sale doesn't really affect you. You are basically telling a homeowner, "I'll give you xxxx number of dollars for your house. Whatever you need to do to pay off your mortgage and expenses are your own business." It's just that you should be aware that if the seller is attempting a short sale, the bank has to OK it and it might take a little longer to get that acceptance!

Have a terrific day! I think you deserve it.

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