Can someone explain the idea of a “short sell” to me?
PM Foz he will know
ugh… that’s a lot of typing… If this short summary doesn’t get it, then give me a call and I’ll gladly explain better.
Basically the proceeds from the sale of a house is less than what is owed to the bank and the bank agrees to the sell even though it is “short” what is owed.
for example, you owe 150,000 on a house and must sell to get out of the house and away from the payment. However, the home is currently only worth 145 on the open market. If you find a buyer willing to pay “top dollar” and is willing to pay 145,000 and after closing costs you are only left over with say 135,000, if the bank will accept that and release their lein, you will have a short sale.
does that help? it’s a very tricky process to go through on the buyer side, and can be just as hard from the seller side. Give me a buzz if you have more or more specific questions about it 412-366-1600. That’s the office number, but if you transfer to my extension (threefiftyseven) it will be forwarded to my cell phone.
do you still owe the 15k or are you free and clear if the bank agrees to release the lein… i mean if they do release it and you owe it what can they hold on you?
they can destroy your credit score
I just bought a place last month that was a short sale. They were originally asking 95K, then dropped it to 75K after a few weeks. I threw a low ball offer of 65K and to my surprise, they accepted it. I think in the end the bank got 58K. I have no idea of how much the owner originally owed on the place, but I know that I did good on my end.
by agreeing to the short sale, they are releasing the 15k and giving away any claim to the funds. That way the buyer has a clear title, and the seller can walk away from the property. It does damage your credit (seller), but does not do nearly the same damage as having the property foreclosed on. The bank also save a pretty penny for not having it foreclosed on. Most people don’t realize the costs that a bank pays in order to foreclose and then sell to recoup some cost. Rarely does a foreclosed house sell for what the bank owes on it, before foreclosure costs.
In theory it sounds like a best case scenario for both parties, but it is extremely hard to get a bank to agree to a short sale versus foreclosing on the house.
why not short sell your houseto a friend? say i owe 100 g’s on my house. ill short sell it to you for 70 g’s and then ill buy it back off of you for 70… perfect now i only owe 70… i knowthere are alot of fees in closings and taxes and all.
It’s actually really hard to get a bank to commit to a short sale. They typically won’t even discuss it with you until you are multiple months behind and on your way to foreclosure.
Here’s an example, I was working with Sellers who owed roughly 365 on their house (at least as of the last time the made a payment. The Bankruptcy court told them to stop making payments almost a year before this, and I’m sure the accrued interest would have made that total a lot higher).
We tried for multiple months to talk with the bank about short selling. I would call, the sellers would call daily (well, I called every other day) could never get anyone to commit or say they would short sell it. We hit the market high enough to cover cost, and kept dropping the cost trying to get a buyer. We finally had someone willing to drop 350,00 on the house if we could get the bank to agree to a short sale. Well after 30-45 days of calling the bank consistently, writing letters, and selling e-mails, noone would talk with the owners or myself. It went to sherriff sale before we got any further.
Last month it sold as a foreclosure for 250,000.
It doesn’t make any sense, if the bank could have spoken with us or allowed us to short sale it, they cuold have saved 100,000 visible dollars. (I say visible because foreclosure costs are hard to see, It could have easily cost them 25-50,000 to foreclose on it)
no bank will “let” you short sale if you aren’t already on the verge of foreclosure. Which is why by the time you get to the position to short sale you are better off than letting it foreclosure (credit wise)
To followup with what Foz said, from the credit reporting standpoint it is MUCH better than being foreclosed. If you complete a short sale, it would reflect the month you sell as “Paid off for less than balance due” or something similar depending upon the specific coding your lender would use. I know for our company to do a short sale you would usually have to have “eminent default” that is able to be verified or already be in default. They don’t quote that but generally short sales are a last ditch effort. We usually do a BPO of the property and check with the investor to verify that percent cap loss to know what we can/cannot approve. In addition we’ll run figures into a program that outline what can be salvaged thru either short sale, short refi, foreclosure, etc to see whats best. Anyways hope that helps a little at least.
The reason that i asked this question in the first place is I have a family member whose husband passed away a number of years ago and the money and everything just caught up to her and she ended up filing for bankruptcy. She has now moved out of the house and is no longer paying the mortgage payments (Aug is the first month she hasn’t paid) and we were wondering as time goes by if the bank may be interested in a short sell instead of a foreclosure.
Honestly, she doesn’t care what happens because she has a bankruptcy and her credit is destroyed anyways, but if we can short sell and get the house sold to someone that wouldn’t be bad.
I guess we will see how it progresses over the next few months.